<PAGE>
As filed with the Securities and Exchange Commission on February 28, 1996
Registration Nos. 33-848; 811-4423
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form N1-A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ___
Post-Effective Amendment No. 17
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 18
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
--------------------------------------------------
(Exact name of Registrant as specified in charter)
Two Pickwick Plaza, Greenwich, CT 06830
----------------------------------------
(Address of Principal Executive Offices)
(203) 863-6200
-------------------------------
(Registrant's telephone number)
Mark L. Lipson
c/o Northstar Investment Management Corporation
Two Pickwick Plaza, Greenwich, Connecticut 06830
------------------------------------------------
(Name and address of agent for service)
Copies of all correspondence to:
Lisa Hurley, Esq.
Northstar Investment Management Corp.
Two Pickwick Plaza
Greenwich, CT 06830
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:
immediately upon filing pursuant to paragraph (b)
---
X on February 29, 1996 pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (a)(1)
---
on [date] pursuant to paragraph (a)(1)
---
75 days after filing pursuant to paragraph (a)(2)
---
on [date] pursuant to paragraph (a)(2) of Rule 485.
---
If appropriate, check the following box:
this post-effective amendment designates a new effective
--- date for a previously filed post-effective amendment.
__________________________________________________________________________
* Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Section 24(f) of the Investment Company
Act of 1940. The Registrant has filed the Notice required by Rule 24f-2 for
its most recent fiscal year on or about February 16, 1996.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(a)
UNDER THE SECURITIES ACT OF 1933
PART A
COMBINED PROSPECTUS
FORM N-1A PROSPECTUS CAPTION
1. Cover Page Cover Page
2. Synopsis Expense Information
3. Condensed Financial Financial Highlights
Information
4. General Description of Cover Page; Investment Objectives and
Registrant Policies of the Funds; Other Investment
Techniques; Risk Factors; General
Information
5. Management of the Fund Management of the Funds
6. Capital Stock and Other How Net Asset Value is
Securities Determined; How to Purchase Shares;
Alternative Sales Arrangements;
Investor Services and Account Policies;
Dividends, Distribution and Taxes;
General Information
7. Purchases of Securities How Net Asset Value is Determined.
Being Offered How to Purchase Shares; Alternative
Sales Arrangments; Investor Services and
Account Policies; Distribution Plans.
8. Redemption or Repurchase How Net Asset Value is Determined; How
to Sell Shares
9. Legal Proceedings Not Applicable
<PAGE>
CROSS REFERENCE SHEET
PART B
FORM N-1A CAPTION IN STATEMENT OF
ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information Cover Page; Other Information
& History
13. Investment Objectives Cover Page; Investment Restrictions;
& Policies Other Investment Techniques
14. Management of the Fund Trustees and Officers
15. Control Persons and N/A
Principal Holders of
Securities
16. Investment Advisory and Services of the Adviser and
Other Services Administrator; Other Information
17. Brokerage Allocation and Portfolio Transactions and Brokerage
Other Practices Allocation
18. Capital Stock and Other Purchases and Redemptions
Securities
19. Purchases, Redemptions and Net Asset Value; Purchases and
Pricing Redemptions.
20. Tax Status Dividends, Distributions and Taxes
21. Underwriter Underwriter and Distribution Services
22. Calculation of Performance Information
Performance Data
23. Financial Statements Financial Statements
PART C
The information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of the Registration Statement.
<PAGE>
[LOGO]
TWO PICKWICK PLAZA (203) 863-6200
GREENWICH, CONNECTICUT, 06830 (800) 595-7827
COMBINED PROSPECTUS FEBRUARY 29, 1996
The Northstar Advantage Funds (the "Funds") are a group of open-end
diversified management investment companies. Each has its own investment
objective and specific investment goals. Shares of the Funds are offered by this
joint Prospectus. Northstar Investment Management Corporation (the "Adviser") is
the investment adviser for each Fund, Northstar Distributors, Inc.
("Underwriter") is the underwriter of the Funds' shares, and Northstar
Administrators Corporation ("Northstar" or "Administrators") serves as
administrator to each Fund. Distributors and Administrators are each affiliates
of the Adviser. Navellier Fund Management, Inc. serves as subadviser for the
Northstar Advantage Special Fund. See "Management of the Funds."
This Prospectus sets forth concisely the information about the Funds
that prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated
February 29, 1996, has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. The Statement of Additional Information
is available without charge upon request to Northstar at the address or
telephone number given above.
* NORTHSTAR ADVANTAGE SPECIAL FUND ("Special Fund") seeks to achieve
capital appreciation through investment in a diversified portfolio of equity
securities selected for their potential for growth, primarily in small- and
mid-capitalization companies.
* NORTHSTAR ADVANTAGE GROWTH FUND ("Growth Fund") seeks to achieve
long-term growth of capital by investing principally in common stocks selected
for their prospects for capital appreciation.
* NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND, ("Income and Growth
Fund") seeks current income balanced with the objective of achieving capital
appreciation through investments in common and preferred stocks, convertible
securities, investment grade corporate debt securities and government
securities, selected for their prospects of producing income and/or capital
appreciation.
* NORTHSTAR ADVANTAGE INCOME FUND ("Income Fund") seeks to realize
income and, secondarily, capital appreciation through investments in a balance
of debt securities, common and preferred stocks, and securities convertible into
common stock.
* NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND ("Government
Securities Fund") seeks to achieve a high level of current income and to
conserve principal by investing in debt obligations issued or guaranteed by the
U.S. Government or its agencies and instrumentalities.
* NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND ("Strategic Income Fund")
seeks to achieve high current income by allocating its investments among the
following three sectors of the fixed income securities markets: debt obligations
of the U.S. Government, its agencies and instrumentalities; high yield-high
risk, lower-rated and nonrated U.S. and foreign fixed income securities; and
investment grade debt obligations of foreign governments, their agencies and
instrumentalities and obligations of supranational entities. The Adviser
believes that by allocating the Fund's assets in this manner, the Fund will
experience a more stable net asset value, since diversification over several
market sectors tends to reduce volatility.
* NORTHSTAR ADVANTAGE HIGH YIELD FUND ("High Yield Fund") seeks to
achieve high current income primarily through investments in long and
intermediate-term high yield-high risk, lower-rated and nonrated corporate debt
instruments.
* NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND ("High Total Return
Fund") seeks to achieve high income by investing predominantly in high
yield-high risk, lower-rated and non-rated U.S. dollar-denominated debt
securities. It is the Fund's policy, while investing in income producing
securities, also to maximize total return from a combination of income and
capital appreciation.
UNDER NORMAL MARKET CONDITIONS THE HIGH YIELD FUND AND HIGH TOTAL
RETURN FUND WILL INVEST AT LEAST 65% OF THEIR ASSETS, AND THE STRATEGIC INCOME
FUND MAY INVEST UP TO 60% (AND NO LESS THAN 20% OF ITS ASSETS) IN LOWER RATED
AND NONRATED BONDS, COMMONLY KNOWN AS "JUNK BONDS," THAT ENTAIL GREATER RISKS,
INCLUDING DEFAULT RISKS, THAN THOSE FOUND IN HIGHER RATED SECURITIES, AND ARE
CONSIDERED SPECULATIVE WITH REGARD TO PAYMENT OF INTEREST AND RETURN OF
PRINCIPAL. INVESTMENT IN THESE FUNDS MAY NOT BE APPROPRIATE FOR ALL INVESTORS.
INVESTORS SHOULD CAREFULLY CONSIDER THESE RISKS BEFORE INVESTING. SEE "RISK
FACTORS -- HIGH YIELD SECURITIES."
WHILE MUTUAL FUNDS OFFER SIGNIFICANT INVESTMENT OPPORTUNITIES AND ARE
PROFESSIONALLY MANAGED, THEY ALSO CARRY RISKS THAT COULD POSSIBLY RESULT IN LOSS
OF PRINCIPAL. SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
EXPENSE INFORMATION
- ----------------------------------------------------------------------
The tables and examples below are designed to assist you in understanding the
various costs and expenses that you will bear directly or indirectly as an
investor in the Funds. Shareholder Transaction Expenses are fees charged
directly to your individual account when you buy, sell or exchange shares.
Annual Operating Expenses are paid out of each Fund's assets and include fees
for portfolio management, maintenance of shareholder accounts, shareholder
servicing, accounting, legal and other services. Class A, Class B, and Class C
shares were first offered to investors in the Government Securities Fund, High
Yield Fund, Income Fund, Growth Fund, Special Fund and Strategic Income Fund on
June 5, 1995. Class T shares are no longer offered to new investors in these
Funds. The rules of the Securities and Exchange Commission require that maximum
sales charges be reflected in the table; however, certain investors may qualify
for reduced or no sales charges. See "How to Purchase Shares."
- --------------------------------------------------------------------------------
NORTHSTAR ADVANTAGE SPECIAL FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Front-End Sales Load Imposed on Purchase
of Shares (as % of Offering Price)............. 4.75% None None None
Maximum Contingent Deferred Sales Load on Sale
of Shares (as a % of the lesser of original
price or redemption proceeds).................. None(1) 5.00%(2) 1.00% 4.00%(2)
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE
NET ASSETS)
Management Fee.................................. .75% .75% .75% .75%
12b-1 Fee....................................... .30% 1.00%(3) 1.00%(3) .95%(3)
Other Expenses (after Class B and C expense
reimbursement)(6).............................. .45% .45% .45% .46%
Total Fund Operating Expenses................... 1.50% 2.20% 2.20% 2.16%
</TABLE>
- --------------------------------------------------------------------------------
NORTHSTAR ADVANTAGE GROWTH FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Front-End Sales Load Imposed on Purchase
of Shares (as % of Offering Price)............. 4.75% None None None
Maximum Contingent Deferred Sales Load on Sale
of Shares (as a % of the lesser of original
price or redemption proceeds).................. None(1) 5.00%(2) 1.00% 4.00%(2)
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE
NET ASSETS)
Management Fee.................................. .75% .75% .75% .75%
12b-1 Fee....................................... .30% 1.00%(3) 1.00%(3) .95%(3)
Other Expenses.................................. .37% .32% .36% .30%
Total Fund Operating Expenses................... 1.42% 2.07% 2.11% 2.00%
</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------- -------- --------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Front-End Sales Load Imposed on Purchase
of Shares (as % of Offering Price)............. 4.75% None None
Maximum Contingent Deferred Sales Load on Sale
of Shares (as a % of the lesser of original
price or redemption proceeds).................. None(1) 5.00%(2) 1.00%
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE
NET ASSETS)
Management Fee.................................. .75% .75% .75%
12b-1 Fee....................................... .30% 1.00%(3) 1.00%(3)
Other Expenses.................................. .46% .48% .47%
Total Fund Operating Expenses................... 1.51% 2.23% 2.22%
</TABLE>
- --------------------------------------------------------------------------------
NORTHSTAR ADVANTAGE INCOME FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
------- ------- ------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Front-End Sales Load Imposed on Purchase of Shares
(as % of Offering Price)................................. 4.75% None None None
Maximum Contingent Deferred Sales Load on Sale of Shares
(as a % of the lesser of original price or redemption
proceeds)................................................ None(1) 5.00%(2) 1.00% 4.00%(2)
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET
ASSETS)
Management Fee............................................ .65% .65% .65% .65%
12b-1 Fee................................................. .30% 1.00%(3) 1.00%(3) .75%(3,4)
Other Expenses............................................ .32% .30% .26% .28%
Total Fund Operating Expenses............................. 1.27% 1.95% 1.91% 1.68%
</TABLE>
- --------------------------------------------------------------------------------
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
------- ------- ------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Front-End Sales Load Imposed on Purchase of Shares
(as a % of Offering Price)................................................... 4.75% None None None
Maximum Contingent Deferred Sales Load on Sale of Shares (as a % of the lesser
of original price or redemption proceeds).................................... None(1) 5.00%(2) 1.00% 4.00%(2)
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
Management Fee (after waiver)(5).............................................. .45% .45% .45% .45%
12b-1 Fee..................................................................... .30% 1.00%(3) 1.00%(3) .65%(3,4)
Other Expenses................................................................ .27% .25% .23% .20%
Total Fund Operating Expenses (after waiver)(5)................................. 1.02% 1.70% 1.68% 1.30%
</TABLE>
3
<PAGE>
- --------------------------------------------------------------------------------
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
------- ------- ------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Front-End Sales Load Imposed on Purchase of Shares
(as % of Offering Price)................................. 4.75% None None None
Maximum Contingent Deferred Sales Load on Sale of Shares
(as a % of the lesser of original price or redemption
proceeds)................................................ None(1) 5.00%(2) 1.00% 4.00%(2)
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET
ASSETS)
Management Fee............................................ .65% .65% .65% .65%
12b-1 Fee................................................. .30% 1.00%(3) 1.00%(3) .95%(3,4)
Other Expenses (after expense reimbursement)(6)........... .41% .41% .37% .30%
Total Fund Operating Expenses............................. 1.36% 2.06% 2.02% 1.90%
</TABLE>
- --------------------------------------------------------------------------------
NORTHSTAR ADVANTAGE HIGH YIELD FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
------- ------- ------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Front-End Sales Load Imposed on Purchase of Shares (as % of Offering
Price)....................................................................... 4.75% None None None
Maximum Contingent Deferred Sales Load on Sale of Shares (as a % of the lesser
of original price or redemption proceeds).................................... None(1) 5.00%(2) 1.00% 4.00%(2)
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
Management Fee................................................................ .45% .45% .45% .45%
12b-1 Fee..................................................................... .30% 1.00%(3) 1.00%(3) .65%(3,4)
Other Expenses................................................................ .27% .26% .27% .23%
Total Fund Operating Expenses................................................. 1.02% 1.71% 1.72% 1.33%
</TABLE>
- --------------------------------------------------------------------------------
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------- -------- --------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Front-End Sales Load Imposed on Purchase
of Shares (as % of Offering Price)............. 4.75% None None
Maximum Contingent Deferred Sales Load on Sale
of Shares (as a % of the lesser of original
price or redemption proceeds).................. None(1) 5.00%(2) 1.00%
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE
NET ASSETS)
Management Fee.................................. .75% .75% .75%
12b-1 Fees...................................... .30% 1.00%(3) 1.00%(3)
Other Expenses.................................. .50% .50% .52%
Total Fund Operating Expenses................... 1.55% 2.25% 2.27%
<FN>
- ------------------------
(1) Purchases of $1 million or more are not subject to an initial sales charge;
however, a CDSC of up to 1% will be imposed on such purchases in the event
of certain redemption transactions within 18 months following the date of
purchase.
(2) The Class B CDSC on redemptions decreases 1% annually after year one to 2%
in years four and five and to 0% after year five. The Class T CDSC on
redemptions decreases 1% annually after year one to 0% after year four.
(3) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by the National Association of
Securities Dealers, Inc. ("NASD") rules regarding investment companies.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
(4) Although the Trustees have set 12b-1 fees at the levels indicated, under
the shareholder-approved 12b-1 plans for Class T shares and applicable
rules of the NASD, the Trustees of each Fund, except for Strategic Income
Fund, may increase these fees to an aggregate of up to 0.95% annually
without further shareholder approval. The Trustees of Strategic Income
Fund, may increase these 12b-1 fees for Class T Shares to an aggregate of
up to 1.00% annually without further shareholder approval.
(5) After waiver of 0.20% effective January 1, 1989. Without such a fee waiver,
the Management Fees would be 0.65% of average daily net assets, and Total
Fund Operating Expenses would be 1.22%, 1.90%, 1.88% and 1.50%,
respectively, for Class A, B, C and T shares.
(6) Absent the expense reimbursement by the Adviser, Other Expenses and Total
Fund Operating Expenses for Class B and Class C shares of the Special Fund
would have been .46% and .48% and 2.21% and 2.23%, respectively, and Other
Expenses and Total Fund Operating Expenses for Class A, B, C and T shares
of Strategic Fund would have been .48%, .47%, .43% and .58% and 1.43%,
2.12%, 2.08% and 2.18%, respectively.
</TABLE>
EXAMPLES: An investor in each of the Funds would pay the following expenses on
a $1,000 investment assuming a 5% annual return throughout the period, and,
unless otherwise noted, redemption at the end of each period.
<TABLE>
<CAPTION>
NORTHSTAR ADVANTAGE SPECIAL FUND
----------------------------------------------------------------------------------
CLASS A CLASS B(1) CLASS B(2) CLASS C CLASS C(2) CLASS T(1) CLASS T(2)
------- ---------- ---------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year.................................. $ 62 $ 72 $ 22 $ 32 $ 22 $ 62 $ 22
3 Years................................. 93 99 69 69 69 88 68
5 Years................................. 125 138 118 118 118 116 116
10 Years................................ 218 236 236 253 253 233 233
<CAPTION>
NORTHSTAR ADVANTAGE GROWTH FUND
----------------------------------------------------------------------------------
CLASS A CLASS B(1) CLASS B(2) CLASS C CLASS C(2) CLASS T(1) CLASS T(2)
------- ---------- ---------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year.................................. $ 61 $ 71 $ 21 $ 31 $ 21 $ 60 $ 20
3 Years................................. 90 95 65 66 66 83 63
5 Years................................. 121 121 111 113 113 108 108
10 Years................................ 210 223 223 244 244 218 218
</TABLE>
<TABLE>
<CAPTION>
NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND
--------------------------------------------------------
CLASS A CLASS B(1) CLASS B(2) CLASS C CLASS C(2)
------- ---------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
1 year............................................ $ 62 $ 73 $ 23 $ 33 $ 23
3 years........................................... 93 100 70 69 69
5 years........................................... 126 139 119 119 119
10 years.......................................... 219 238 238 255 255
</TABLE>
<TABLE>
<CAPTION>
NORTHSTAR ADVANTAGE INCOME FUND
----------------------------------------------------------------------------------
CLASS A CLASS B(1) CLASS B(2) CLASS C CLASS C(2) CLASS T(1) CLASS T(2)
------- ---------- ---------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year.................................. $ 60 $ 70 $ 20 $ 29 $ 19 $ 57 $ 17
3 Years................................. 86 91 61 60 60 73 53
5 Years................................. 114 125 105 103 103 91 91
10 Years................................ 194 210 210 223 223 188 188
<CAPTION>
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
----------------------------------------------------------------------------------
CLASS A CLASS B(1) CLASS B(2) CLASS C CLASS C(2) CLASS T(1) CLASS T(2)
------- ---------- ---------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year.................................. $ 57 $ 67 $ 17 $ 27 $ 17 $ 53 $ 13
3 Years................................. 78 84 54 53 53 61 41
5 Years................................. 101 102 92 91 91 71 71
10 Years................................ 166 183 183 199 199 149 149
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
----------------------------------------------------------------------------------
CLASS A CLASS B(1) CLASS B(2) CLASS C CLASS C(2) CLASS T(1) CLASS T(2)
------- ---------- ---------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year.................................. $ 61 $ 71 $ 21 $ 31 $ 21 $ 59 $ 19
3 Years................................. 89 95 65 63 63 80 60
5 Years................................. N/A N/A N/A N/A N/A N/A N/A
10 Years................................ N/A N/A N/A N/A N/A N/A N/A
<CAPTION>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
----------------------------------------------------------------------------------
CLASS A CLASS B(1) CLASS B(2) CLASS C CLASS C(2) CLASS T(1) CLASS T(2)
------- ---------- ---------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year.................................. $ 57 $ 57 $ 17 $ 27 $ 17 $ 54 $ 14
3 Years................................. 78 84 54 54 54 62 42
5 Years................................. 101 113 93 93 93 73 73
10 Years................................ 166 184 184 203 203 152 152
</TABLE>
<TABLE>
<CAPTION>
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND
--------------------------------------------------------
CLASS A CLASS B(1) CLASS B(2) CLASS C CLASS C(2)
------- ---------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
1 year............................................ $ 63 $ 73 $ 23 $ 33 $ 23
3 years........................................... 94 100 70 71 71
5 years........................................... 128 140 120 121 121
10 years.......................................... 223 241 241 261 261
</TABLE>
- ------------------------
(1) Class B and Class T shares convert to Class A shares eight years after
purchase in the case of B Shares and on the later of eight years after
purchase or May 31, 1998 in the case of T Shares; therefore, Class A
expenses are used after year eight.
(2) Assumes no redemption.
The examples above assume the reinvestment of all dividends and distributions
and that the percentage amounts listed under "Annual Operating Expenses" remain
the same each year. The examples should not be considered to be indicative of
actual or expected performance or expenses, both of which will vary.
6
<PAGE>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
The financial highlights set forth below present certain information and
ratios as well as performance information for a share of each Class outstanding
throughout each year or portion thereof. Except where indicated, percentages for
periods of less than one year have been annualized. The financial highlights for
fiscal years ended in 1995 (and for all prior periods in the case of the Income
and Growth and High Total Return Funds) have been audited by Coopers & Lybrand
L.L.P., independent accountants, whose report thereon is incorporated by
reference in the Statement of Additional Information and should be read in
conjunction with the related audited financial statements and notes thereto
which are contained in the Annual Report for each Fund. Further information
about performance of each Fund is also contained in the Annual Report, a copy of
which may be obtained without charge from Northstar. The financial highlights
for the Growth, Special, Income, Strategic Income, High Yield and Government
Securities Funds for the periods prior to 1995 were audited by other independent
accountants.
- --------------------------------------------------------------------------------
NORTHSTAR ADVANTAGE SPECIAL FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1995
---------------------------------------------
CLASS A CLASS B CLASS C CLASS T
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Asset Value beginning of
period..................... $ 19.56 $ 19.56 $ 19.56 $ 19.64
Income from investment
operations:
Net investment income
(loss)................... (0.09) (0.12) (0.15) (0.34)
Net realized and
unrealized gain (loss)... 2.48 2.43 2.46 2.57
--------- --------- --------- ---------
Total from investment
operations............... 2.39 2.31 2.31 2.23
--------- --------- --------- ---------
Less distributions:
Dividends from net
realized gain............ (1.03) (1.03) (1.03) (1.03)
--------- --------- --------- ---------
Total distributions....... (1.03) (1.03) (1.03) (1.03)
--------- --------- --------- ---------
Net Asset Value end of
period..................... $ 20.92 $ 20.84 $ 20.84 $ 20.84
--------- --------- --------- ---------
--------- --------- --------- ---------
Total Return (excluding
sales charges)(1).......... 12.20% 11.79% 11.79% 11.34%
--------- --------- --------- ---------
--------- --------- --------- ---------
Ratios/supplemental data:
Net assets end of period
(thousands).............. $ 2,335 $ 1,491 $ 62 $ 33,557
--------- --------- --------- ---------
--------- --------- --------- ---------
Ratio of expenses to
average net assets....... 1.50% 2.20% 2.20% 2.16%
--------- --------- --------- ---------
--------- --------- --------- ---------
Ratio of expenses to
average net assets before
waiver or
reimbursement (3)........ -- 2.21% 2.23% --
--------- --------- --------- ---------
--------- --------- --------- ---------
Ratio of net investment
income to average net
assets................... (0.91)% (1.64)% (1.60)% (1.50)%
--------- --------- --------- ---------
--------- --------- --------- ---------
Portfolio Turnover Rate... 71% 71% 71% 71%
--------- --------- --------- ---------
--------- --------- --------- ---------
<CAPTION>
CLASS T SHARES
------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986
-------- -------- -------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value beginning of
period..................... $ 20.79 $ 17.40 $ 15.74 $ 10.64 $ 11.67 $ 9.55 $ 7.90 $ 8.92 $ 10.00
Income from investment
operations:
Net investment income
(loss)................... (0.25) (0.32) (0.33) (0.21) (0.20) (0.06) (0.13) (0.14) (0.06)
Net realized and
unrealized gain (loss)... (0.76) 3.83 2.61 6.24 (0.83) 2.18 1.78 (0.88) (1.02)
-------- -------- -------- ------- ------- ------- ------- ------- -------
Total from investment
operations............... (1.01) 3.51 2.28 6.03 (1.03) 2.12 1.65 (1.02) (1.08)
-------- -------- -------- ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net
realized gain............ (0.14) (0.12) (0.62) (0.93) -- -- -- -- --
-------- -------- -------- ------- ------- ------- ------- ------- -------
Total distributions....... (0.14) (0.12) (0.62) (0.93) -- -- -- -- --
-------- -------- -------- ------- ------- ------- ------- ------- -------
Net Asset Value end of
period..................... $ 19.64 $ 20.79 $ 17.40 $ 15.74 $ 10.64 $ 11.67 $ 9.55 $ 7.90 $ 8.92
-------- -------- -------- ------- ------- ------- ------- ------- -------
-------- -------- -------- ------- ------- ------- ------- ------- -------
Total Return (excluding
sales charges)(1).......... (4.86)% 20.16% 14.54% 57.27% (8.83)% 22.20% 20.89% (11.43)% (10.80)%
-------- -------- -------- ------- ------- ------- ------- ------- -------
-------- -------- -------- ------- ------- ------- ------- ------- -------
Ratios/supplemental data:
Net assets end of period
(thousands).............. $ 38,848 $ 28,838 $ 11,336 $ 5,480 $ 3,024 $ 3,958 $ 3,330 $ 3,078 $ 3,823
-------- -------- -------- ------- ------- ------- ------- ------- -------
-------- -------- -------- ------- ------- ------- ------- ------- -------
Ratio of expenses to
average net assets....... 2.16% 2.34% 2.84% 2.95% 2.95% 2.95% 2.96% 2.94% 2.90%
-------- -------- -------- ------- ------- ------- ------- ------- -------
-------- -------- -------- ------- ------- ------- ------- ------- -------
Ratio of expenses to
average net assets before
waiver or
reimbursement (3)........ -- -- -- 3.69% 4.98% 4.89% 6.01% 4.52% 4.82%
-------- -------- -------- ------- ------- ------- ------- ------- -------
-------- -------- -------- ------- ------- ------- ------- ------- -------
Ratio of net investment
income to average net
assets................... (1.25)% (1.66)% (2.12)% (1.57)% (0.97)% (0.44)% (1.06)% (1.22)% (0.76)%
-------- -------- -------- ------- ------- ------- ------- ------- -------
-------- -------- -------- ------- ------- ------- ------- ------- -------
Portfolio Turnover Rate... 39.43% 34.57% 39.62% 85.43% 71.79% 85.36% 39.88% 57.08% 27.86%
-------- -------- -------- ------- ------- ------- ------- ------- -------
-------- -------- -------- ------- ------- ------- ------- ------- -------
</TABLE>
7
<PAGE>
- --------------------------------------------------------------------------------
NORTHSTAR ADVANTAGE GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1995
-----------------------------------------
CLASS A CLASS B CLASS C CLASS T
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value beginning of
period..................... $ 17.59 $ 17.59 $ 17.59 $ 15.75
Income from investment
operations:
Net investment income
(loss)................... 0.08 0.06 0.04 0.07
Net realized and
unrealized gain (loss)... 1.95 1.92 1.92 3.77
-------- -------- -------- --------
Total from investment
operations............... 2.03 1.98 1.96 3.84
-------- -------- -------- --------
Less distributions:
Dividends from net
investment income........ (0.10) (0.08) (0.06) (0.07)
Dividends from net
realized gain............ (3.99) (3.99) (3.99) (3.99)
Dividends from capital.... -- -- -- --
-------- -------- -------- --------
Total distributions....... (4.09) (4.07) (4.05) (4.06)
-------- -------- -------- --------
Net Asset Value end of
period..................... $ 15.53 $ 15.50 $ 15.50 $ 15.53
-------- -------- -------- --------
-------- -------- -------- --------
Total Return (excluding
sales charges)(1).......... 11.55% 11.27% 11.17% 24.40%
-------- -------- -------- --------
-------- -------- -------- --------
Ratios/supplemental data:
Net assets end of period
(thousands).............. $ 1,355 $ 1,987 $ 69 $ 76,343
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of expenses to
average net assets....... 1.42% 2.07% 2.11% 2.00%
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of net investment
income to average net
assets................... 0.63% 0.06% 0.02% 0.37%
-------- -------- -------- --------
-------- -------- -------- --------
Portfolio Turnover Rate... 134% 134% 134% 134%
-------- -------- -------- --------
-------- -------- -------- --------
<CAPTION>
CLASS T SHARES
------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value beginning of
period..................... $ 17.33 $ 16.36 $ 16.37 $ 12.49 $ 13.85 $ 11.96 $ 10.47 $ 10.54 $ 10.00
Income from investment
operations:
Net investment income
(loss)................... 0.08 0.02 0.02 0.09 0.10 0.20 0.16 0.09 0.03
Net realized and
unrealized gain (loss)... (1.41) 1.67 1.30 4.62 (0.83) 2.66 1.58 (0.07) 0.87
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............... (1.33) 1.69 1.32 4.71 (0.73) 2.86 1.74 0.02 0.90
-------- -------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income........ (0.08) (0.04) (0.02) (0.08) (0.10) (0.20) (0.17) (0.08) (0.03)
Dividends from net
realized gain............ (0.15) (0.67) (1.31) (0.75) (0.51) (0.76) (0.08) -- (0.33)
Dividends from capital.... (0.02) (0.01)(2) -- -- (0.02) (0.01) -- (0.01) --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total distributions....... (0.25) (0.72) (1.33) (0.83) (0.63) (0.97) (0.25) (0.09) (0.36)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value end of
period..................... $ 15.75 $ 17.33 $ 16.36 $ 16.37 $ 12.49 $ 13.85 $ 11.96 $ 10.47 $ 10.54
-------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total Return (excluding
sales charges)(1).......... (7.66)% 10.36% 8.05% 38.10% (5.24)% 24.25% 16.70% 0.11% 8.91%
-------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------
Ratios/supplemental data:
Net assets end of period
(thousands).............. $ 76,391 $ 80,759 $ 56,759 $ 40,884 $ 24,927 $ 29,842 $ 25,359 $ 27,493 $ 17,013
-------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------
Ratio of expenses to
average net assets....... 2.00% 2.04% 2.15% 2.25% 2.33% 2.33% 2.46% 2.29% 2.77%
-------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------
Ratio of net investment
income to average net
assets................... 0.49% 0.13% 0.09% 0.66% 0.80% 1.39% 1.40% 0.83% 0.37%
-------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------
Portfolio Turnover Rate... 53.76% 42.27% 46.77% 63.56% 54.22% 74.56% 58.73% 54.72% 32.66%
-------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------
</TABLE>
- --------------------------------------------------------------------------------
NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------------------
1994
---------------------------------------
1995 CLASS A CLASS B CLASS C
--------------------------------------- FROM FROM FROM
CLASS A CLASS B CLASS C 11/8/93 2/9/94 3/21/94
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value
beginning of
period........... $ 10.00 $ 9.99 $ 9.99 $ 10.00 $ 10.64 $ 10.37
Income from
investment
operations:
Net investment
income......... .35 .27 .27 0.30 0.20 0.20
Net realized and
unrealized gain
(loss)......... .84 .85 .85 (0.05) (0.65) (0.38)
----- ----- ----- ----------- ----------- -----------
Total from
investment
operations..... 1.19 1.12 1.12 0.25 (0.45) (0.18)
----- ----- ----- ----------- ----------- -----------
Less
distributions:
Dividends (from
net investment
income)........ (0.33) (0.27) (0.28) (0.25) (0.20) (0.20)
----- ----- ----- ----------- ----------- -----------
Net Asset Value
end of period.... $ 10.86 $ 10.84 $ 10.83 $ 10.00 $ 9.99 $ 9.99
----- ----- ----- ----------- ----------- -----------
----- ----- ----- ----------- ----------- -----------
Total Return
(excluding sales
charge).......... 13.19% 12.31% 12.33% 2.48% (4.20)% (1.75)%
----- ----- ----- ----------- ----------- -----------
----- ----- ----- ----------- ----------- -----------
Ratios/Supplemental
Data:
Net assets end
of period (in
thousands)..... 76,031 60,347 53,661 72,223 37,767 4,823
----- ----- ----- ----------- ----------- -----------
----- ----- ----- ----------- ----------- -----------
Ratio of
expenses to
average net
assets......... 1.51% 2.23% 2.22% 1.50% 2.20% 2.20%
----- ----- ----- ----------- ----------- -----------
----- ----- ----- ----------- ----------- -----------
Ratio of expense
reimbursement
to average net
assets......... 0% 0% 0% 0.06% 0.16% 0.47%
----- ----- ----- ----------- ----------- -----------
----- ----- ----- ----------- ----------- -----------
Ratio of net
investment
income to
average net
assets......... 3.39% 2.66% 2.67% 3.73% 3.00% 2.87%
----- ----- ----- ----------- ----------- -----------
----- ----- ----- ----------- ----------- -----------
Portfolio
Turnover
Rate........... 91% 91% 91% 26% 26% 26%
----- ----- ----- ----------- ----------- -----------
----- ----- ----- ----------- ----------- -----------
</TABLE>
8
<PAGE>
- --------------------------------------------------------------------------------
NORTHSTAR ADVANTAGE INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1995
-----------------------------------------
CLASS A CLASS B CLASS C CLASS T
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value beginning of
period..................... $ 12.77 $ 12.77 $ 12.77 $ 11.54
Income from investment
operations:
Net investment income
(loss)................... 0.43 0.35 0.38 0.57
Net realized and
unrealized gain (loss)... 1.06 1.09 1.07 2.27
-------- -------- -------- --------
Total from investment
operations............... 1.49 1.44 1.45 2.84
-------- -------- -------- --------
Less distributions:
Dividends from net
investment income........ (0.48) (0.45) (0.45) (0.59)
Dividends from net
realized gain............ (1.25) (1.25) (1.25) (1.25)
Dividends from capital.... -- -- -- --
-------- -------- -------- --------
Total distributions....... (1.73) (1.70) (1.70) (1.84)
-------- -------- -------- --------
Net Asset Value end of
period..................... $ 12.53 $ 12.51 $ 12.52 $ 12.54
-------- -------- -------- --------
-------- -------- -------- --------
Total Return (excluding
sales charges)(1).......... 11.95% 11.56% 11.49% 25.11%
-------- -------- -------- --------
-------- -------- -------- --------
Ratios/supplemental data:
Net assets end of period
(thousands).............. $ 797 $ 1,759 $ 231 $ 72,472
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of expenses to
average net assets....... 1.27% 1.95% 1.91% 1.68%
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of net investment
income to average net
assets................... 4.99% 4.38% 4.49% 4.44%
-------- -------- -------- --------
-------- -------- -------- --------
Portfolio Turnover Rate... 131% 131% 131% 131%
-------- -------- -------- --------
-------- -------- -------- --------
<CAPTION>
CLASS T SHARES
------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value beginning of
period..................... $ 12.94 $ 12.05 $ 11.66 $ 10.13 $ 10.71 $ 9.71 $ 9.11 $ 10.39 $ 10.00
Income from investment
operations:
Net investment income
(loss)................... 0.57 0.49 0.55 0.57 0.61 0.68 0.62 0.56 0.40
Net realized and
unrealized gain (loss)... (1.25) 1.20 0.36 1.53 (0.54) 1.00 0.58 (1.04) 0.67
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............... (0.68) 1.69 0.91 2.10 0.07 1.68 1.20 (0.48) 1.07
-------- -------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income........ (0.54) (0.49) (0.52) (0.57) (0.63) (0.68) (0.60) (0.57) (0.40)
Dividends from net
realized gain............ (0.16) (0.31) -- -- -- -- -- (0.22) (0.28)
Dividends from capital.... (0.02)(2) -- -- -- (0.02) -- -- (0.01) --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total distributions....... (0.72) (0.80) (0.52) (0.57) (0.65) (0.68) (0.60) (0.80) (0.68)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value end of
period..................... $ 11.54 $ 12.94 $ 12.05 $ 11.66 $ 10.13 $ 10.71 $ 9.71 $ 9.11 $ 10.39
-------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total Return (excluding
sales charges)(1).......... (5.33)% 14.08% 8.06% 21.17% 0.78% 17.70% 13.39% (5.35)% 10.74%
-------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------
Ratios/supplemental data:
Net assets end of period
(thousands).............. $ 73,764 $ 80,841 $ 56,823 $ 49,367 $ 44,750 $ 58,006 $ 57,425 $ 58,722 $ 49,332
-------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------
Ratio of expenses to
average net assets....... 1.69% 1.77% 2.02% 2.06% 2.10% 2.04% 2.10% 1.98% 2.15%
-------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------
Ratio of net investment
income to average net
assets................... 4.36% 3.99% 4.73% 5.21% 5.73% 6.38% 6.30% 5.70% 5.72%
-------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------
Portfolio Turnover Rate... 59.26% 38.26% 58.96% 76.87% 57.39% 56.15% 24.57% 45.91% 78.71%
-------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------
</TABLE>
- --------------------------------------------------------------------------------
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1995
---------------------------------------------
CLASS A CLASS B CLASS C CLASS T
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Asset Value beginning of
period..................... $ 9.51 $ 9.51 $ 9.51 $ 8.74
Income from investment
operations:
Net investment income
(loss)................... 0.34 0.30 0.30 0.58
Net realized and
unrealized gain (loss)... 0.59 0.59 0.59 1.35
--------- --------- --------- ---------
Total from investment
operations............... 0.93 0.89 0.89 1.93
--------- --------- --------- ---------
Less distributions:
Dividends from net
investment income........ (0.37) (0.33) (0.33) (0.60)
Dividends from net
realized gain............
Dividends from capital.... -- -- -- --
--------- --------- --------- ---------
Total distributions....... (0.37) (0.33) (0.33) (0.60)
--------- --------- --------- ---------
Net Asset Value end of
period..................... $ 10.07 $ 10.07 $ 10.07 $ 10.07
--------- --------- --------- ---------
--------- --------- --------- ---------
Total Return (excluding
sales charges)(1).......... 10.04% 9.61% 9.61% 22.90%
--------- --------- --------- ---------
--------- --------- --------- ---------
Ratios/supplemental data:
Net assets end of period
(thousands).............. $ 3,235 $ 2,790 $ 8 $ 150,951
--------- --------- --------- ---------
--------- --------- --------- ---------
Ratio of expenses to
average net assets....... 1.02% 1.70% 1.68% 1.30%
--------- --------- --------- ---------
--------- --------- --------- ---------
Ratio of expenses to
average net assets before
waiver or
reimbursement (3)........ 1.22% 1.90% 1.88% 1.50%
--------- --------- --------- ---------
--------- --------- --------- ---------
Ratio of net investment
income to average net
assets................... 6.01% 5.20% 5.28% 6.23%
--------- --------- --------- ---------
--------- --------- --------- ---------
Portfolio Turnover Rate... 295% 295% 295% 295%
--------- --------- --------- ---------
--------- --------- --------- ---------
<CAPTION>
CLASS T SHARES
-----------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986
--------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value beginning of
period..................... $ 10.32 $ 9.22 $ 8.99 $ 8.47 $ 8.47 $ 8.26 $ 8.80 $ 9.94 $ 10.00
Income from investment
operations:
Net investment income
(loss)................... 0.56 0.59 0.61 0.67 0.68 0.72 0.75 0.64 0.54
Net realized and
unrealized gain (loss)... (1.56) 1.09 0.23 0.52 -- 0.21 (0.48) (1.10) 0.27
--------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............... (1.00) 1.68 0.84 1.19 0.68 0.93 0.27 (0.46) 0.81
--------- -------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income........ (0.57) (0.58) (0.61) (0.67) (0.68) (0.72) (0.75) (0.64) (0.54)
Dividends from net
realized gain............ -- -- -- -- -- -- -- -- (0.33)
Dividends from capital.... (0.01) -- -- -- -- -- (0.06) (0.04) --
--------- -------- -------- -------- -------- -------- -------- -------- --------
Total distributions....... (0.58) (0.58) (0.61) (0.67) (0.68) (0.72) (0.81) (0.68) (0.87)
--------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value end of
period..................... $ 8.74 $ 10.32 $ 9.22 $ 8.99 $ 8.47 $ 8.47 $ 8.26 $ 8.80 $ 9.94
--------- -------- -------- -------- -------- -------- -------- -------- --------
--------- -------- -------- -------- -------- -------- -------- -------- --------
Total Return (excluding
sales charges)(1).......... (9.82)% 18.48% 9.77% 14.73% 8.57% 11.73% 2.97% (4.72)% 8.50%
--------- -------- -------- -------- -------- -------- -------- -------- --------
--------- -------- -------- -------- -------- -------- -------- -------- --------
Ratios/supplemental data:
Net assets end of period
(thousands).............. $ 152,608 $184,156 $144,144 $121,389 $108,420 $123,735 $169,421 $237,190 $223,598
--------- -------- -------- -------- -------- -------- -------- -------- --------
--------- -------- -------- -------- -------- -------- -------- -------- --------
Ratio of expenses to
average net assets....... 1.29% 1.31% 1.39% 1.44% 1.43% 1.45% 1.88% 1.79% 1.89%
--------- -------- -------- -------- -------- -------- -------- -------- --------
--------- -------- -------- -------- -------- -------- -------- -------- --------
Ratio of expenses to
average net assets before
waiver or
reimbursement (3)........ 1.49% 1.51% 1.59% 1.64% 1.63% 1.65% -- -- --
--------- -------- -------- -------- -------- -------- -------- -------- --------
--------- -------- -------- -------- -------- -------- -------- -------- --------
Ratio of net investment
income to average net
assets................... 6.00% 5.83% 6.81% 7.68% 8.23% 8.57% 8.47% 7.02% 6.38%
--------- -------- -------- -------- -------- -------- -------- -------- --------
--------- -------- -------- -------- -------- -------- -------- -------- --------
Portfolio Turnover Rate... 314.91% 81.41% 120.08% 87.00% 16.77% 73.94% 494.05% 412.29% 241.73%
--------- -------- -------- -------- -------- -------- -------- -------- --------
--------- -------- -------- -------- -------- -------- -------- -------- --------
</TABLE>
9
<PAGE>
- --------------------------------------------------------------------------------
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1994
-------
1995 CLASS T
------------------------------------- FROM
CLASS A CLASS B CLASS C CLASS T 7/1/94
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value beginning of period.......... $12.24 $12.24 $12.24 $11.71 $12.00
Income from investment operations:
Net investment income (loss)............... 0.63 0.55 0.55 0.98 0.51
Net realized and unrealized gain (loss).... 0.13 0.15 0.14 0.66 (0.25)
------- ------- ------- ------- -------
Total from investment operations........... 0.76 0.70 0.69 1.64 0.26
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income....... (0.60) (0.55) (0.55) (0.96) (0.49)
Dividends from net realized gain........... -- -- -- -- (0.05)
Dividends from capital..................... -- -- -- -- (0.01)(2)
------- ------- ------- ------- -------
Total distributions........................ (0.60) (0.55) (0.55) (0.96) (0.55)
------- ------- ------- ------- -------
Net Asset Value end of period................ $12.40 $12.39 $12.38 $12.39 $11.71
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total Return (excluding sales charges)(1).... 6.40% 5.89% 5.81% 14.54% 2.14%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratios/supplemental data:
Net assets end of period (thousands)....... $21,790 $22,143 $2,172 $30,228 $25,252
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratio of expenses to average net assets.... 1.36% 2.06% 2.02% 1.90% 1.90%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratio of expenses to average net assets
before waiver or reimbursement (3)........ 1.43% 2.12% 2.08% 2.18% 2.53%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratio of net investment income to average
net assets................................ 7.03% 6.47% 6.48% 6.86% 7.92%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Portfolio Turnover Rate.................... 153% 153% 153% 153% 156%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
- --------------------------------------------------------------------------------
NORTHSTAR ADVANTAGE HIGH YIELD FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------------------
1995 CLASS T SHARES
----------------------------------------- ------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T 1994 1993 1992 1991 1990 1989
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value
beginning of
period........... $ 8.68 $ 8.68 $ 8.68 $ 8.29 $ 9.31 $ 9.09 $ 7.94 $ 6.27 $ 8.55 $ 10.00
Income from
investment
operations:
Net investment
income
(loss)......... 0.48 0.44 0.44 0.84 0.81 0.85 0.92 1.08 1.12 0.60
Net realized and
unrealized gain
(loss)......... (0.10) (0.09) (0.09) 0.26 (0.99) 0.80 1.19 1.67 (2.30) (1.45)
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
Total from
investment
operations..... 0.38 0.35 0.35 1.10 (0.18) 1.65 2.11 2.75 (1.18) (0.85)
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
Less
distributions:
Dividends from
net investment
income......... (0.50) (0.46) (0.46) (0.83) (0.83) (0.83) (0.94) (1.08) (1.10) (0.60)
Dividends from
net realized
gain........... -- -- -- -- (0.01) (0.60) (0.02) -- -- --
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
Total
distributions... (0.50) (0.46) (0.46) (0.83) (0.84) (1.43) (0.96) (1.08) (1.10) (0.60)
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
Net Asset Value
end of period.... $ 8.56 $ 8.57 $ 8.57 $ 8.56 $ 8.29 $ 9.31 $ 9.09 $ 7.94 $ 6.27 $ 8.55
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
Total Return
(excluding sales
charges)(1)...... 4.48% 4.17% 4.17% 13.71% (2.18)% 18.89% 27.57% 46.49% (14.59)% (8.81)%
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
Ratios/supplemental
data:
Net assets end
of period
(thousands).... $ 7,466 $ 79,063 $ 3,410 $139,711 $ 136,426 $ 125,095 $ 64,063 $ 25,651 $ 11,342 $ 11,045
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
Ratio of
expenses to
average net
assets......... 1.02% 1.71% 1.72% 1.33% 1.34% 1.40% 1.50% 1.50% 1.44% 1.35%
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
Ratio of
expenses to
average net
assets before
waiver or
reimbursement (3)... -- -- -- -- -- -- 1.55% 1.96% 2.25% 2.65%
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
Ratio of net
investment
income to
average net
assets......... 9.83% 9.18% 9.29% 9.69% 9.08% 8.84% 10.30% 14.84% 15.15% 11.44%
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
Portfolio
Turnover
Rate........... 103% 103% 103% 103% 86.20% 176.40% 121.51% 57.48% 156.23% 39.63%
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
-------- -------- -------- -------- --------- --------- -------- -------- -------- ---------
</TABLE>
10
<PAGE>
- --------------------------------------------------------------------------------
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------------------
1994
----------------------------
1995 CLASS A CLASS B CLASS C
--------------------------- FROM FROM FROM
CLASS A CLASS B CLASS C 11/8/93 2/9/94 3/21/94
------- ------- ------- ------------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value beginning of period..... $ 4.41 $ 4.41 $ 4.41 $ 5.00 $ 5.20 $ 5.06
Income from investment operations:
Net investment income (loss).......... .48 .45 .44 0.41 0.33 0.26
Net realized and unrealized gain
(loss)............................... .07 .06 .09 (0.60) (0.80) (0.65)
------- ------- ------- ------ ------ ------
Total from investment operations...... .55 .51 .53 (0.19) (0.47) (0.39)
------- ------- ------- ------ ------ ------
Less distributions:
Dividends (from net investment
income).............................. (0.48) (0.45) (0.45) (0.40) (0.32) (0.26)
------- ------- ------- ------ ------ ------
Net Asset Value end of period........... $ 4.48 $ 4.47 $ 4.49 $ 4.41 $ 4.41 $ 4.41
------- ------- ------- ------ ------ ------
------- ------- ------- ------ ------ ------
Total Return (excluding sales charge)... 13.02% 11.97% 12.44% (4.11)% (9.30)% (7.21)%
------- ------- ------- ------ ------ ------
------- ------- ------- ------ ------ ------
Ratios/Supplemental Data:
Net assets end of period (in
thousands)........................... 88,552 96,362 11,011 50,797 25,880 2,330
------- ------- ------- ------ ------ ------
------- ------- ------- ------ ------ ------
Ratio of expenses to average net
assets............................... 1.55% 2.25% 2.27% 1.50% 2.20% 2.20%
------- ------- ------- ------ ------ ------
------- ------- ------- ------ ------ ------
Ratio of expense reimbursement to
average net assets................... 0% 0% 0% 0.11% 0.20% 0.99%
------- ------- ------- ------ ------ ------
------- ------- ------- ------ ------ ------
Ratio of net investment income to
average net assets................... 10.90% 10.20% 10.18% 10.09% 9.72% 9.46%
------- ------- ------- ------ ------ ------
------- ------- ------- ------ ------ ------
Portfolio Turnover Rate............... 145% 145% 145% 163% 163% 163%
------- ------- ------- ------ ------ ------
------- ------- ------- ------ ------ ------
<FN>
- ------------------------------
(1) Total returns for 1986 for the Government Securities, Growth, Income, and
Special Funds (1989 for the High Yield Fund and 1994 for Strategic Income
Fund) represent actual, not annualized, percentages. Unaudited prior to
1992.
(2) Represents distribution in excess of net investment income due to
differences in book and tax income.
(3) Reflects ratio that would have existed, in the case of the Government
Securities Fund, had the former Adviser not elected to waive 0.20% of its
investment advisory fee effective January 1, 1989, and, in the case of the
High Yield, Special and Strategic Income Funds, had the former Adviser or
its affiliates not reimbursed such Funds for a portion of their expenses.
</TABLE>
11
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
- ----------------------------------------------------------------------
Each Fund has its own investment objective and policies, and each utilizes
specific investment techniques to achieve its objective. Each of the Funds is
diversified, which is a means of reducing risk by investing the Fund's assets in
a broad range of securities designed to meet the Fund's objectives. The
objectives and policies of each Fund can be expected to affect the investment
return of such Fund and the degree of market and financial risk to which such
Fund is exposed. The percentage limitations included in these policies apply
only at the time of purchase. Policies and objectives that are noted as
"fundamental" cannot be changed without a shareholder vote. All other policies,
including the investment objective for each Fund other than the Income and
Growth Fund and High Total Return Fund are not fundamental and may be changed by
the Fund's Trustees without shareholder approval. Shareholders of those Funds
will be notified at least thirty days in advance of a change in the investment
objective of a Fund, and will be notified of any other material changes. If
there is a change to a Fund's investment objective, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current financial goals. Shareholders may incur a contingent deferred sales
charge if shares are redeemed in response to a change in objective. There can,
of course, be no guarantee that the investment objective of any of the Funds
will be achieved, due to the uncertainty inherent in all investments.
NORTHSTAR ADVANTAGE SPECIAL FUND. The Fund's investment objective is capital
appreciation. The Fund invests in a diversified portfolio of equity securities
selected on the basis of their potential for growth. The Fund invests in equity
securities of companies which are listed on domestic securities exchanges or are
traded in the over-the-counter markets. However, the Fund may, to a limited
extent, invest in securities traded in markets outside the U.S. Securities
purchased by the Fund are primarily issues of smaller, lesser-known companies.
While the Fund does not limit itself to smaller companies, many of its
investments are in small, emerging growth companies. Small companies are those,
for example, with annual revenues of less than $500 million. Emerging growth
companies are those that, while still in the developmental stage, have
demonstrated, or are expected to achieve, growth of earnings over major business
cycles. Smaller, less established companies may offer greater opportunities for
capital appreciation than larger, better established companies, but may also
involve certain special risks. Such companies often have limited product lines,
markets or financial resources and depend heavily on a small management group.
Their securities may trade less frequently, in smaller volumes, and fluctuate
more sharply in value than exchange listed securities of larger companies.
Equity securities in which the Fund may invest consist of common stocks,
preferred stocks, convertible securities, warrants and other stock purchase
rights, private placements and other restricted equity securities, equity
interests in trusts, limited partnerships and joint ventures and interests in
real estate investment trusts. The Fund may invest up to 20% of its net assets
in the securities of foreign issuers, not more than 10% of which may be in
issuers whose securities are not listed on a U.S. securities exchange. See "Risk
Factors -- Foreign Investments."
NORTHSTAR ADVANTAGE GROWTH FUND. The Fund's investment objective is long-term
growth of capital. Under normal conditions, at least 65% of the Fund's total
assets will be invested in securities purchased for their prospects for capital
appreciation. The Fund invests principally in common stocks of companies which
are listed on the domestic securities exchanges or are traded in the domestic
over-the-counter markets, but may, to a limited extent, invest in securities
traded in markets outside the U.S. The Fund also may invest in preferred stocks
and convertible securities issued by such companies.
The Fund invests in industries and companies which, in the opinion of the
Adviser, have potential for capital growth and selects securities of companies
with records of above-average earnings growth or companies which, in its view,
are substantially undervalued in relation to assets. Some of the equity
securities in which the Fund invests may be speculative and involve substantial
risk, since they may experience significant price fluctuations in both rising
and declining markets. The Fund may invest up to 20% of its net assets in
securities of foreign issuers, not more than 10% of which may be invested in
issuers that are not listed on a U.S. securities exchange. See "Risk Factors --
Foreign Investments."
NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND. The Fund's investment objective
is to seek current income balanced with the objective of achieving capital
appreciation. Under normal market conditions, the Fund will invest at least 65%
of its total assets in income-producing securities. In seeking to achieve its
objective, the Fund will invest in equity securities of domestic and foreign
issuers that have prospects for dividend income and growth of capital,
convertible securities, and selected debt securities of domestic and foreign
private and government issuers. These debt securities would include U.S.
Government obligations, foreign and domestic investment grade bonds, and bonds
issued by foreign governments considered stable by the Adviser and supported
through the authority to levy taxes by national state or provincial governments
or similar political subdivisions. The proportion of holdings in
12
<PAGE>
common stocks, preferred stocks, other equity-related securities, and debt
securities will vary in accordance with the level of return that can be achieved
from these various types of securities. Securities are also purchased on the
basis of fundamental attraction regarding capital appreciation prospects. In
this way, income is "balanced" with capital. The Fund invests in equity
securities that are listed primarily on the New York Stock Exchange or American
Stock Exchange or that are traded in the over-the-counter market. Equity and
equity-related securities purchased by the Fund will typically be of large
well-established companies, but may also include to a lesser extent small
capitalization companies selected for their growth potential. Under normal
conditions, the Fund does not intend to invest more than 30% of its assets in
convertible securities. Debt securities purchased by the Fund will only be
securities rated investment grade (I.E., in the top four rating categories of
Moodys or S&P) at the time of purchase. Securities that are in the lowest
investment grade debt category may have speculative characteristics and changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than in the case of
higher grade securities. In the event that an existing holding is downgraded to
below investment grade, the Fund may nevertheless retain the security.
The Fund may invest up to 20% of its net assets in the securities of foreign
issuers, not more than 10% of which shall be in issuers whose securities are not
listed on a U.S. securities exchange. See "Risk Factors -- Foreign Investments."
NORTHSTAR ADVANTAGE INCOME FUND. The Fund's primary investment objective is
income. As a secondary objective, the Fund seeks capital appreciation. The Fund
invests in debt securities and equity securities of companies which are listed
or traded on domestic securities exchanges or in the over-the-counter market,
but may to a limited extent, invest in securities traded in markets outside the
U.S. Under normal market conditions, at least 65% of the Fund's total assets
will be invested in income-producing securities. Up to 25% of the Fund's assets
may be invested in debt securities rated below investment grade (i.e. rated
lower than Baa by Moody's or BBB by S&P), or which are not rated, but normally
will not invest in securities rated below B by Moody's or S&P. These securities
are considered speculative investments and generally involve greater risk,
including the risk of loss of income and principal, than higher-rated
securities. In addition, the yield and price of a lower-rated security may tend
to fluctuate more than the yield and price of a higher-rated security.
Investment in these securities involves special risks outlined below under the
heading "Risk Factors -- High Yield Securities" and in the Appendix. The Fund
may invest up to 20% of its net assets in securities of foreign issuers, not
more that 10% of which may be invested in issuers that are not listed on a U.S.
securities exchange. See "Risk Factors -- Foreign Investments."
Equity securities include common and preferred stocks, warrants or rights to
purchase such stock, and securities convertible into such stock. Debt securities
may be of any maturity and pay fixed, floating or adjustable interest rates. The
Fund also may invest in discount obligations, including zero coupon securities,
that do not pay interest but rather are issued at a significant discount to
their maturity values, or securities that pay interest, at the issuer's option,
in additional securities instead of cash (pay-in-kind securities). The values of
debt securities generally fluctuate inversely with changes in interest rates.
This is less likely to be true for adjustable or floating rate securities, since
interest rate changes are more likely to be reflected in changes in the rates
paid on the securities. However, reductions in interest rates also may translate
into lower distributions paid by the Fund. Additionally, because zero coupon and
pay-in-kind securities do not pay interest but the Fund nevertheless must accrue
and distribute the income deemed to be earned on a current basis, the Fund may
have to sell other investments to raise the cash needed to make income
distributions.
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND. The investment objective of
the Fund is to achieve a high level of current income and to conserve principal
by investing primarily in debt obligations issued or guaranteed by the U.S.
Government or its agencies and instrumentalities ("U.S. Government Securities").
U.S. Government Securities include U.S. Treasury obligations and obligations
of agencies and instrumentalities of the U.S. Government. The Fund may at
various times have all or substantially all of its assets in U.S. Government
Securities issued by a single agency or instrumentality. Some U.S. Government
Securities, such as U.S. Treasury obligations, are supported by the full faith
and credit of the United States; others, such as securities of Federal Home Loan
Banks, are supported by the right of the issuer to borrow from the U.S.
Treasury; still others, such as bonds issued by the Federal National Mortgage
Association, a private corporation, are supported only by the credit of the
instrumentality. Securities of an instrumentality are not insured by the U.S.
Government and there can be no assurance that the U.S. Government will support
an instrumentality it sponsors. Because the U.S. Government is not obligated by
law to provide support to an instrumentality it sponsors, the Government
Securities Fund will invest in the securities issued by such an instrumentality
only when the Adviser determines that the credit risk with respect to the
instrumentality does not make the securities of the instrumentality unsuitable
investments. The Adviser does not intend to invest in excess of 35% of the
Fund's assets in securities not supported by the full faith and credit of the
United States, nor does it intend to invest more than 20% of the portfolio in
securities issued by any single instrumentality not supported by the full faith
and credit of the United States.
13
<PAGE>
Securities of the sort owned by the Fund generally possess a high degree of
dependability with respect to timely payment of principal and interest. However,
such securities fluctuate in market price (but not in ultimate repayment
amount), primarily with interest rate levels and trends, rising when interest
rates decline and declining when interest rates rise. Consequently, the Fund's
net asset value will fluctuate in response to changing interest rates. The Fund
may invest in U.S. Government Securities of varying maturities and duration, and
the portfolio at times may hold a significant portion of its assets in
securities with longer durations. Long duration securities have greater price
movements in response to interest rate changes than movements in shorter
duration securities and may impact the Fund's net asset value accordingly. The
Adviser's determination of average duration reflects its outlook on interest
rates as well as its determination of best relative value in making investments.
Mortgage-backed securities have yield and maturity characteristics corresponding
to the underlying mortgage loans. Fluctuating prepayments of principal may
result from the refinancing or foreclosure of the underlying mortgage loans.
Because of the prepayment risks, these securities may have less potential for
capital appreciation during periods of declining interest rates than other
investments of comparable maturities, while having a comparable risk of decline
during periods of rising interest rates.
The Fund may invest in zero coupon treasury securities which consist of
stripped interest or principal components of U.S. Treasury bonds or notes
("STRIPs"). STRIPs involve the separation of the corpus (face amount) of the
bond or note from the coupon (interest portion). The U.S. Treasury redeems the
bond or note corpus (zero coupon bond or note) for the face value thereof at
maturity and redeems the stripped coupon (interest portion) beginning at the
date specified thereon. Zero coupon Treasury securities pay no interest to
holders during their life and usually trade at a deep discount from their face
or par value. They are subject to greater fluctuations of market value in
response to changing interest rates than debt obligations of comparable
maturities which make periodic distributions of interest. On the other hand,
zero coupon securities eliminate reinvestment risk and lock in a rate of return
to maturity. Stripped interests in U.S. Treasury securities that are not issued
through the U.S. Treasury's STRIPs program are not considered to be U.S.
Government Securities. The Fund will accrue and distribute income from zero
coupon securities on a current basis and may have to sell securities to generate
cash for distributions.
The Fund's assets will be managed so that the Fund is a permissible investment
for federal credit unions under the Federal Credit Union Act and rules and
regulations established by the National Credit Union Administration. To the
extent that any investment or investment practice under the Fund's investment
policies described herein or in the Statement of Additional Information are not
permissible for federal credit unions, the Fund shall refrain from purchasing
such investment or engaging in such practice. The Fund will notify shareholders
60 days before making any change to this policy. THE GOVERNMENT SECURITIES
FUND'S SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT OR ITS
AGENCIES OR INSTRUMENTALITIES, OR BY ANY OTHER PERSON OR ENTITY.
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND. The Fund seeks high current
income. The Fund will, under normal market conditions, allocate its investments
among the three fixed income securities markets described below. The Adviser
believes that allocation of the Fund's investments among the three sectors will
better enable the Fund to achieve its objective and may reduce investment risk
and volatility. The Fund will, under normal market conditions, maintain at least
20% of its total assets in each of the three sectors and may not invest more
than 60% of its total assets in any one sector, and have substantially all of
the Fund's assets invested in the three market sectors. No more than 60% of the
Fund's assets may be invested in foreign issuers across all sectors. In the
past, the markets for U.S. Government Securities, high yield corporate fixed
income securities and debt securities of foreign issuers have tended to move
independently of each other and have at times moved in opposite directions.
There is no assurance that they will continue to do so in the future. The
Adviser believes that when financial markets exhibit a lack of correlation, the
ability to respond strategically to market forces by allocating the Fund's
assets among the sectors should result in lower price volatility than would be
experienced by investing exclusively in any one of the markets. See "Risk
Factors -- High Yield Securities and Foreign Investments."
The Adviser will determine the amount of assets to be allocated to each sector
based on its assessment of the maximum level of current income that can be
achieved without incurring undue risks to principal value. In making this
allocation, the Adviser will rely on its analysis of economic conditions,
interest rate risk, currency risk and its analysis of opportunities in each
sector based on current and historical market data. The Adviser will
continuously review its allocations and make adjustments as it deems
appropriate. The Fund's assets allocated to each sector will be managed in
accordance with the investment policies described below.
THE U.S. GOVERNMENT SECURITIES SECTOR. U.S. Government Securities are
considered among the most creditworthy of fixed income securities. For a
description of U.S Government Securities and their characteristics, including
mortgage-backed securities, see "Northstar Advantage Government Securities
Fund." The Fund may invest all or substantially all of this sector's assets in
U.S.
14
<PAGE>
Government Securities issued by a single agency or instrumentality. The Fund may
invest in varying maturities and may adjust the average maturity of the
investments held by the Fund from time to time based upon the Adviser's
assessment of relative yields of securities of different maturities and its
expectations of future changes in interest rates.
THE HIGH YIELD SECTOR. The High Yield sector will invest predominantly in
high yielding, higher risk, lower-rated or nonrated foreign government fixed
income securities and corporate fixed income securities traded in the U.S. high
yield corporate market. These securities are rated below investment grade (I.E.,
rated below Baa by Moody's or below BBB by S&P). The Fund may invest without
limitation in securities rated as low as Ca by Moody's or CC by S&P (or in
nonrated securities deemed to be of equivalent standing by the Adviser) and up
to 10% of the Fund's assets allocated to this sector may be in the lowest rating
categories (C by Moody's and D by S&P). The lowest rating categories include
bonds which are in default. High yield securities are subject to greater market
fluctuations, and may be less liquid and subject to greater risk of loss of
income and principal due to default by the issuer than are investments in lower
yielding, higher-rated debt instruments. Investment in these securities involves
special risks. See, "Risk Factors -- High Yield Securities" and the Appendix.
The Adviser will attempt to maximize income and reduce risk within the High
Yield sector through diversification of the sector's portfolio investments and
by credit analysis of each issuer, as well as by monitoring broad economic
trends and corporate developments. The Fund will not necessarily invest in the
highest yielding securities available if, in the Adviser's view, the differences
in yield are not sufficient to justify the accompanying higher risks, and may
invest in securities rated investment grade at the time of purchase.
The foreign government securities rated below investment grade in which the
Fund invests include securities issued or guaranteed by foreign national,
provincial, state or other governments with taxing power, or their agencies or
instrumentalities, and include securities issued by developing countries and
issuers located in developing countries. Such foreign government securities may
be denominated in U.S. dollars or other currencies. In selecting and allocating
assets among the countries in which the Fund will invest, the Adviser will
develop a long-term view of those countries and will engage in an analysis of
sovereign risk by focusing on factors such as a country's public finances,
monetary policy, external accounts, financial markets, stability of exchange
rate policy and labor conditions.
The high yield securities in which the Fund may invest will consist
predominantly of bonds, but may include to a lesser extent preferred stocks and
securities convertible into or exchangeable for equity securities, or which
carry the right, in the form of a warrant or as part of a unit with the
security, to acquire equity securities. The Fund intends to purchase such
securities for their yield characteristics rather than for the purpose of
exercising the associated rights to obtain equity securities. The Fund may
invest in debt securities of any maturity that pay fixed, floating or adjustable
interest rates. The Fund also may invest in debt securities issued at a discount
to face value, including zero coupon securities, and securities that pay
interest, at the issuer's option, in additional securities (pay-in-kind
securities). The values of debt securities generally fluctuate inversely with
changes in interest rates. This is less likely to be true for adjustable or
floating rate securities, since interest rate changes are more likely to be
reflected in changes in the rates paid on the securities. However, reductions in
interest rates also may translate into lower distributions paid by the Fund.
Additionally, because zero coupon and pay-in-kind securities do not pay interest
but the Fund nevertheless must accrue and distribute the income deemed to be
earned on a current basis, the Fund may have to sell other investments to raise
the cash needed to make income distributions.
The High Yield sector may also invest in participations in (i) entities
organized and operated for the purpose of restructuring the investment
characteristics of instruments issued or guaranteed by foreign governments of
emerging market countries ("Sovereign Debt Obligations"), and (ii) loans between
foreign governments and financial institutions. Sovereign Debt Obligations held
by the Fund generally will not be traded on securities exchanges. The Fund may
invest in Sovereign Debt Obligations customarily referred to as "Brady Bonds,"
which are created through the exchange of existing commercial bank loans to
foreign entities for new obligations in connection with debt restructuring.
Brady Bonds may be collateralized or uncollateralized and issued in various
currencies (although most are dollar denominated), and they are actively traded
in the over-the-counter secondary market. Dollar-denominated, collateralized
Brady Bonds, which may be fixed rate par bonds or floating rate discount bonds,
are generally collateralized in full as to principal due at maturity by U.S.
Treasury zero coupon obligations which have the same maturity as the Brady
Bonds.
The Fund's investments in loans are expected in most instances to be in the
form of loan participations and loan assignments from third parties. The Fund
may invest up to 15% of its net assets in participations, assignments and other
illiquid investments. See "Illiquid Securities." Both the government that is the
borrower on the loan and the bank selling the participation or assignment will
be considered to be the issuer of the participation or assignment, and the Fund
will acquire participations only if the lender has total assets of more than $25
billion and its senior unsecured debt is rated Baa or higher by Moody's or BBB
or higher by S&P.
15
<PAGE>
THE INTERNATIONAL SECTOR. The International Sector will invest in investment
grade (I.E . rated Baa or better by Moody's or BBB or better by S&P, or in
unrated securities that the Adviser determines to be of equivalent quality) debt
obligations, and other fixed income securities denominated in U.S. dollars and
other currencies (i) issued or guaranteed by foreign national, provincial,
state, or other governments with taxing authority, or by their agencies or
instrumentalities; and (ii) of supranational entities (described below). The
Fund may invest in any country where the Adviser believes there is the potential
for income.
Debt obligations may or may not be supported by the full faith and credit of a
foreign government. Supranational entities include international organizations
designated or supported by governmental entities to promote economic
reconstruction or development and international banking institutions and related
government agencies. Examples of supranational entities include the World Bank,
the Inter-American Development Bank and the European Bank for Reconstruction and
Development.
NORTHSTAR ADVANTAGE HIGH YIELD FUND. The investment objective of the Fund is
high current income. The Fund normally will be invested substantially in
long-term and intermediate-term fixed income securities, with emphasis on high
yield-high risk, lower-rated or nonrated corporate debt instruments of U.S. and
foreign issuers. Under normal market conditions, at least 65% of the Fund's
total assets will be invested in high yield bonds. The Fund may invest without
limitation in securities rated as low as Ca by Moody's or CC by S&P (or in
securities which are not rated but are considered to be of equivalent quality by
the Adviser), and may invest up to 1% of its assets in the lowest rating
categories (C for Moody's and D for S&P). The lowest rating categories include
bonds which are in default. High yield securities are subject to special risks,
typically are subject to greater market fluctuations and may be less liquid and
subject to greater risk of loss of income and principal due to default by the
issuer. See, "Risk Factors -- High Yield Securities" and the Appendix. The
Adviser will attempt to maximize income and reduce risk through diversification
of the portfolio and by credit analysis of each issuer, as well as by monitoring
broad economic trends and corporate developments.
The Fund may invest in debt securities of any maturity that pay fixed,
floating or adjustable interest rates. The Fund also may invest in discount
obligations, including zero-coupon securities, which do not pay interest but
rather are issued at a significant discount to their maturity values, or
securities that pay interest, at the issuer's option, in additional securities
instead of cash (pay-in-kind securities). The values of debt securities
generally fluctuate inversely with changes in interest rates. This is less
likely to be true for adjustable or floating rate securities, since interest
rate changes are more likely to be reflected in changes in the rates paid on the
securities. However, reductions in interest rates also may translate into lower
distributions paid by the Fund. Additionally, because zero coupon and
pay-in-kind securities do not pay interest but the Fund nevertheless must accrue
and distribute the income deemed to be earned on a current basis, the Fund may
have to sell other investments to raise the cash needed to make income
distributions.
The Fund may invest up to 35% of its assets in securities of foreign issuers,
10% of which may be of issuers which are not traded on a U.S. securities
exchange. See "Risk Factors -- Foreign Investments." The Fund may invest up to
25% of its assets in equity or equity-related securities, such as preferred
stocks (which may or may not have a dividend yield), convertible securities or
rights or warrants associated with debt instruments.
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND. The investment objective of the
Fund is to seek high income. As an investment policy, the Fund, while investing
in income producing securities, will seek to maximize total return from a
combination of income and capital appreciation. The Fund, will pursue this
policy by taking advantage of equity participations, market developments, yield
disparities and variations in the creditworthiness of issuers.
Under normal market conditions, the Fund will seek to achieve its investment
objective by investing at least 65% of its total assets in higher-yielding,
lower-rated U.S. dollar-denominated debt securities of U.S. and foreign issuers,
which involve special risks and are predominantly speculative in character. The
Fund may invest up to 35% of its assets in non-U.S. Dollar denominated
securities. Investments in securities offering the high current income sought by
the Fund, while generally providing greater income and potential opportunity for
gain than investments in higher rated securities, also entail greater risk. The
value of high yield securities (and therefore the net asset value per share of
the Fund) can be expected to increase or decrease in response to changes in
interest rates, real or perceived changes in the credit risks associated with
its portfolio investments, and other factors affecting the credit markets
generally. The Fund is subject to a limit of 50% of its assets in securities of
foreign issuers, including a limit of 35% of such assets in emerging market debt
Emerging Markets are countries whose sovereign bonds generally are rated below
investment grade and whose financial markets are not well-developed. The Fund
intends to restrict its investments in emerging markets to those with sound
economies that are expected to experience strong growth with controlled
inflation, and therefore higher-than-average returns, over time. See "Risk
Factors -- Foreign Investments."
Most of the debt securities in which the Fund invests are lower rated, and may
include bonds in the lowest rating categories (C for Moody's and D for S&P) and
unrated bonds. Most of the securities will be rated at least Caa by Moody's or
at least CCC by S&P, or if not
16
<PAGE>
rated, are of equivalent quality in the opinion of the Adviser. The Fund may
invest up to 10%, and hold up to 25%, of its assets in securities rated below
Caa in the case of Moody's or CCC by S&P. Such debt securities are highly
speculative and may be in default of payment of interest and/or repayment of
principal may be in arrears. The issuers of such debt securities may be involved
in bankruptcy or reorganization proceedings and/or may be restructuring
outstanding debt. Investing in bankrupt and troubled companies involves special
risks. See "Risk Factors -- High Yield Securities" and the Appendix.
The Fund may invest in debt securities of any maturity that pay fixed,
floating or adjustable interest rates. The Fund also may invest in discount
obligations, including zero-coupon securities, which do not pay interest but,
rather, are issued at a significant discount to their maturity values, or
securities that pay interest, at the issuer's option, in additional securities
instead of cash (pay-in-kind securities). The values of debt securities
generally fluctuate inversely with changes in interest rates. This is less
likely to be true for adjustable or floating rate securities, since interest
rate changes are more likely to be reflected in changes in the rates paid on the
securities. However, reductions in interest rates also may translate into lower
distributions paid by the Fund. Additionally, because zero coupon and
pay-in-kind securities do not pay interest but the Fund nevertheless must accrue
and distribute the income deemed to be earned on a current basis, the Fund may
have to sell other investments to raise the cash needed to make income
distributions. To a lesser extent the Fund may invest in equity or
equity-related securities, including common stock, preferred stock, convertible
securities and rights and warrants attached to debt instruments. Typically the
Fund would purchase a high yield security that is convertible or exchangeable
for equity securities, or which carries the right in the form of a warrant or as
part of a unit with the security to acquire equity securities. The Fund would
ordinarily purchase these securities for their yield characteristics or capital
appreciation potential.
RISK FACTORS
- ----------------------------------------------------------------------
HIGH YIELD SECURITIES. Each of the Strategic Income Fund, High Yield Fund,
Income Fund and High Total Return Fund may invest in higher yielding securities
that carry lower investment grade ratings. These high yield high-risk securities
are rated below investment grade by the primary rating agencies (Moody's and
S&P). See the Appendix for a description of bond rating categories. The value of
lower rated securities generally is more dependent on the ability of the company
to meet interest and principal payments than is the case for higher rated
securities. Conversely, the value of higher rated securities may be more
sensitive to interest rate movements than lower rated securities. Companies
issuing high yield securities may not be as strong financially as those issuing
bonds with higher credit ratings. Investments in such companies are considered
to be more speculative than higher quality investments. In addition, the market
for lower rated securities is generally less liquid than the market for higher
rated securities, and adverse publicity and investor perceptions may also have a
greater negative impact on the market for these securities.
Companies issuing high yield bonds are more vulnerable to real or perceived
economic changes (such as rising interest rates), political changes or adverse
developments specific to the company. Adverse economic, political or other
developments may impair the company's ability to service principal and interest
obligations, to meet projected business goals and to obtain additional
financing, particularly if the company is highly leveraged. In the event of a
default, a Fund would experience a reduction of its income and could expect a
decline in the market value of the defaulted securities.
Weighted average composition of the following Funds' portfolios at the end of
their 1995 fiscal year was:
<TABLE>
<CAPTION>
STRATEGIC HIGH TOTAL
INCOME HIGH YIELD RETURN INCOME
--------------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Investment Grade....................................... --% --% % 17.7%
BB..................................................... 26.8 37.1 21.8 16.2
B...................................................... 29.5 60.2 51.3 5.0
CCC.................................................... -- 1.4 7.7
CC..................................................... -- -- --
C...................................................... -- -- --
D...................................................... -- -- --
Nonrated............................................... 4.3 1.3 15.2 4.4
U.S. Governments, equities, and other.................. 39.4 -- 4.0 56.7
------ ----------- ---------- ----------
TOTAL.................................................. 100% 100% 100% 100%
------ ----------- ---------- ----------
------ ----------- ---------- ----------
</TABLE>
This table does not reflect the current or future composition of any of the
Fund's portfolios.
17
<PAGE>
FOREIGN INVESTMENTS. Each Fund, except the U.S. Government Securities Fund,
may invest in securities of foreign issuers. Securities of some foreign
companies and governments may be traded in the U.S., but many foreign securities
are traded primarily in foreign markets. In addition to generally higher
transaction costs associated with foreign investing, risks of foreign investing
include:
CURRENCY RISKS. A Fund must buy the local currency when its buys a foreign
security, and it sells local currency when it sells the security. The value of a
foreign security held by the Fund will be affected by the value of the local
currency relative to the U.S. dollar, causing the Fund to lose money at times,
despite an increase in the value of the security.
POLITICAL AND ECONOMIC RISK. Political and economic risks may exist,
particularly in underdeveloped or developing countries which may have relatively
unstable governments and economies based on only a few industries. In some
countries, there is the risk that the government may take over the assets or
operations of a company or that the government may impose taxes or limits on the
removal of a Fund's assets from that country.
REGULATORY RISK. There is generally less government supervision of foreign
markets, and issuers are not subject to the uniform accounting, auditing and
financial reporting standards and practices applicable to domestic issuers.
There also may be less publicly available information about foreign issuers.
OTHER INVESTMENT TECHNIQUES
- ----------------------------------------------------------------------
Unless otherwise stated, each of the following strategies and techniques may
be utilized by each of the Funds. The Funds may, but do not currently intend to,
engage in certain additional investment techniques not described in this
Prospectus. These techniques and additional information on the securities and
techniques described in the Prospectus are contained in the Statement of
Additional Information.
OPTIONS AND FUTURES TRANSACTIONS. Each Fund may enter into futures contracts
on securities, financial indices and foreign currencies and options on such
contracts and may invest in options on securities, financial indices and foreign
currencies, and forward contracts (collectively "derivative instruments"). The
Funds intend to use derivative instruments primarily to hedge the value of their
portfolios against potential adverse movements in securities price, foreign
currency markets or interest rates. To a limited extent, the Funds may also use
derivative instruments for non-hedging purposes such as increasing a Fund's
income or otherwise enhancing return. When a Fund invests in a derivative
instrument, it may be required to segregate cash and other high-grade liquid
assets or portfolio securities to "cover" the Fund's position. Assets segregated
or set aside may limit the Fund's portfolio management activities while the Fund
maintains the positions, which could diminish the Fund's return due to foregoing
other potential investments with such assets.
The use of options and futures strategies involves certain other risks,
including the risk that no liquid market will exist and that the Fund will be
unable to effect closing transactions at any particular time or at an acceptable
price, and the risk of imperfect correlation between movements in options and
futures prices and movements in the price of securities which are the subject of
the hedge. The successful use of options and futures strategies depends on the
ability of the Adviser to forecast correctly rate movements and general stock
market price movements. Expenses and losses incurred as a result of these
hedging strategies will reduce the current return of the Fund. See the Statement
of Additional Information.
REPURCHASE AGREEMENTS. A Fund may invest in repurchase agreements, either for
temporary defensive purposes or to generate income from its cash balances. Under
a repurchase agreement, the Fund buys a security from a bank or dealer, which is
obligated to buy it back at a fixed price and time. The security is held in a
separate account at the Fund's custodian and constitutes the Fund's collateral
for the bank's or dealer's repurchase obligation. Additional collateral may be
added so that the obligation will at all times be fully collateralized. However,
if the bank or dealer defaults or enters into bankruptcy, the Fund may
experience costs and delays in liquidating the collateral, and may experience a
loss if it is unable to demonstrate its right to the collateral in a bankruptcy
proceeding. Repurchase agreements maturing more than seven days in the future
are considered illiquid, and a Fund will invest no more than 5% of its net
assets in such repurchase agreements at any time. Each Fund, under normal market
conditions, does not intend to invest more than 15% of its assets in repurchase
agreements.
WHEN ISSUED SECURITIES. The Funds may acquire securities on a "when-issued"
basis by contracting to purchase securities for a fixed price on a date beyond
the customary settlement time with no interest accruing until settlement. If
made through a dealer, the contract is dependent on the dealer completing the
sale. The dealer's failure could deprive the Fund of an advantageous yield or
price.
18
<PAGE>
These contracts may be considered securities and involve risk to the extent that
the value of the underlying security changes prior to settlement. A Fund may
realize short-term profits or losses if the contracts are sold. Transactions in
when-issued securities may be limited by certain Internal Revenue Code
requirements.
ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net assets in
illiquid securities, including restricted securities or private placements. An
illiquid security is a security that cannot be sold quickly in the normal course
of business. Some securities cannot be sold to the U.S. public because of their
terms or because of SEC regulations. The Adviser may determine that securities
that cannot be sold to the U.S. public, but that can be sold to institutional
investors ("Rule 144A" securities) or on foreign markets, are liquid, following
guidelines established by the Trustees of each Fund.
TRADING AND PORTFOLIO TURNOVER. Each Fund generally intends to purchase
securities for long-term investment. However, a Fund may purchase a security in
anticipation of relatively short-term price gains and short-term transactions
may result from liquidity needs, securities having reached a price or yield
objective, changes in interest rates or the credit standing of an issuer, or by
reason of economic or other developments not foreseen at the time of the initial
investment decision. Portfolio turnover rates are usually not a factor in making
buy and sell decisions. A Fund may also sell one security and simultaneously
purchase the same or comparable security to take advantage of short-term
differentials in yield or price. Increased portfolio turnover may result in
higher costs for brokerage commissions, dealer mark-ups and other transaction
costs and may also result in taxable capital gains. Short term trading may also
be restricted by certain tax rules.
TEMPORARY INVESTMENTS. In periods of unusual market conditions, for temporary
and defensive purposes, when the Adviser considers it appropriate, a Fund may
maintain part or all of its assets in cash, or may invest part or all of its
assets in U.S. government securities, commercial paper, bankers' acceptances,
repurchase agreements and certificates of deposit.
INVESTMENT RESTRICTIONS. For information on certain fundamental and
non-fundamental investment restrictions applicable to each Fund, see "Investment
Restrictions" in the Statement of Additional Information.
PERFORMANCE INFORMATION
- ----------------------------------------------------------------------
The Funds may, from time to time, include their yield and total returns in
advertisements or reports to shareholders or prospective investors. Both yield
and total return figures are computed separately for each class of shares of
each Fund in accordance with formulas specified by the Securities and Exchange
Commission. Both yield and total return figures are based on historical earnings
and are not intended to indicate future performance. The yield for each class of
a Fund (which shows the rate of income a Fund earned on its investment as a
percentage of a Fund's share price) will be computed by dividing (a) net
investment income over a 30-day period by (b) an average value of invested
assets (using the average number of shares entitled to receive dividends and the
maximum offering price per share or the maximum redemption price per share) at
the end of the period, as appropriate, all in accordance with applicable
regulatory requirements. Such amounts will be compounded for six months and then
annualized for a twelve-month period to derive the yield of each class.
Standardized quotations of average annual total return for each class of
shares will be expressed in terms of the average annual compounded rate of
return of a hypothetical investment in the class of shares over a period of 1, 5
and 10 years (or up to the life of the class of shares). Total return is the
percentage increase or decrease in the value of an investment over a stated
period of time. Standardized total return quotations reflect the deduction of a
proportional share of expenses (on an annual basis) of a class, deduction of the
maximum initial sales load or the maximum CDSC applicable to a complete
redemption of the investment, as appropriate, and assume that all dividends and
distributions are reinvested when paid. The Funds also may quote a supplementary
rate of total return over different periods of time or by non-standardized
means.
Performance for Class B and Class C shares typically will be less favorable
than that for Class A and Class T shares due to the higher expense ratios for
Class B and Class C shares. Performance for Class T shares will be less
favorable than Class A shares due to higher distribution and service fees. For a
complete description of the methods used to determine yield and total return for
the Funds, see the Statement of Additional Information.
19
<PAGE>
HOW NET ASSET VALUE IS DETERMINED
- ----------------------------------------------------------------------
All purchases, redemptions and exchanges are processed at the net asset value
("NAV") per share next calculated after your request is received and approved.
In order to receive a day's price, your order must be received by 4:00 p.m. EST.
NAV fluctuates and is determined separately for each class as of the close of
regular trading on the New York Stock Exchange (normally 4:00 p.m. EST) each day
the Exchange is open. NAV is computed by dividing the total value of a Fund's
securities and other assets, less all liabilities, by the total number of shares
outstanding. The specific expenses borne by each class of shares will be
deducted from that class and will result in different NAVs and dividend
payments. The NAV of a Class B, Class C or Class T share will generally be lower
than that of a Class A share because of the higher distribution fees or certain
other class specific expenses borne by these classes. However, the net asset
value per share of each class will tend to converge immediately after the
payment of dividends.
Under normal market conditions, daily prices for securities are obtained from
independent pricing services determined by them in accordance with the
Registration Statement for each Fund. Securities are valued at market value or,
if a market quotation is not readily available, at their fair value determined
in good faith under procedures established by and under the supervision of the
Trustees. Money market instruments maturing within 60 days are valued at
amortized cost, which approximates market value. See the Statement of Additional
Information.
MANAGEMENT OF THE FUNDS
- ----------------------------------------------------------------------
THE TRUSTEES. The Trustees of each Fund ("Trustees") oversee the operations
of the Fund and perform the various duties imposed on trustees by the laws of
the Commonwealth of Massachusetts and the 1940 Act. The Trustees meet quarterly
to review the Funds' investment policies, performance, expenses and other
business affairs and elect the officers of each Fund annually. The Trustees
delegate day to day management of the Funds to the officers of the respective
Funds.
THE ADVISER AND AFFILIATED SERVICE PROVIDERS. Pursuant to an Investment
Advisory Agreement with each Fund, Northstar Investment Management Corporation
acts as the investment adviser to each Fund. In this capacity, the Adviser,
subject to the authority of the Trustees, is responsible for furnishing
continuous investment supervision to the Funds and is responsible for the
management of the Funds' portfolios. Northstar Administrators Corporation, an
affiliate of the Adviser, furnishes certain administrative, compliance and
accounting services to each Fund. Employees of the Adviser and Administrator
serve as officers of the Funds, and the Adviser provides office space for the
Funds and pays the salaries of all Fund officers and Trustees who are affiliated
with the Adviser. Northstar Distributors, Inc., also an affiliate of the
Adviser, serves as principal underwriter of the shares of each Fund, conducting
a continuous offering pursuant to a "best efforts" arrangement requiring it to
take and pay for only such securities as may be sold to the public through
investment dealers.
The Adviser and its affiliates are indirect, majority owned subsidiaries of
ReliaStar Financial Corp. ("ReliaStar"). ReliaStar's address is 20 Washington
Avenue South, Minneapolis, MN 55401. Combined minority interests held by members
of senior management currently equal 20%. ReliaStar is a publicly traded holding
company whose subsidiaries specialize in the life and health insurance
businesses. Through Northwestern National Life Insurance Company and other
subsidiaries, ReliaStar issues and distributes individual life insurance,
annuities and mutual funds, group life and health insurance and life and health
reinsurance, and provides related investment management services. Prior to June
2, 1995, the Northstar Advantage Special, Growth, Income, High Yield, Strategic
Income and Government Securities Funds were managed by Boston Security
Counsellors, Inc. ("BSC").
The Adviser's fee is accrued daily against the value of each Fund's net assets
and is payable by each Fund monthly at an annual rate of 0.75% on the first $250
million of each Fund's average daily net assets in the case of the Northstar
Advantage Income and Growth and High Total Return Funds, scaled down to 0.55%
for assets over $1 billion, and at the following rates for the other Northstar
Advantage Funds: Government Securities Fund -- 0.65%; High Yield Fund -- 0.45%;
Income Fund -- 0.65%; Growth Fund -- 0.75%; Special Fund -- 0.75%; Strategic
Income Fund -- 0.65% (each of which may be subject to voluntary waiver or
reimbursement by the Adviser). The investment advisory fees paid by Income and
Growth Fund, High Total Return Fund, Growth Fund and Special Fund are higher
than the fees paid by most mutual funds. The Administrator's fee is accrued
daily against the value of each Fund's net assets and is payable monthly at an
annual rate of .10% of each Fund's average daily net assets. The Administrator
also charges an annual account service fee of $5.00 for each account of
beneficial holders of shares in a Fund for providing certain shareholder
services and assisting broker-dealers in servicing Fund accounts. Until June 2,
1997 the Administrator will receive no administrative or account fees from the
Special, Growth, Income, High Yield, Strategic Income and Government Securities
Funds.
20
<PAGE>
The Adviser places all orders for the purchase and sale of portfolio
securities. In selecting brokers, the Adviser may consider research and
brokerage services furnished to it. The Adviser also advises other accounts that
may purchase and hold securities in which the Funds may invest and certain
persons affiliated with the Adviser may purchase and hold, directly or
indirectly, securities in which the Funds or other accounts invest, subject to
internal guidelines regarding conflicts of interest. In allocating trades among
accounts for which the Adviser recommends the purchase or sale of the same
security, the Adviser follows procedures designed to ensure that such trades are
executed on a basis that is fair and equitable to each account.
INVESTMENT PERSONNEL OF ADVISER. Thomas Ole Dial has served as portfolio
manager of the High Total Return Fund since its inception in November 1993, and,
since October 1995 as co-manager of the Strategic Income Fund. Mr. Dial is a
Vice President of each Fund and Executive Vice President and Chief Investment
Officer -- Fixed Income of the Adviser. Mr. Dial also serves as manager of the
Northstar High Yield Bond Fund and Northstar Multi-Sector Bond Fund, series of a
separate open-end management investment company sponsored by the Adviser. Prior
to employment by the Adviser in October 1993, Mr. Dial served as Executive Vice
President and Chief Investment Officer -- Fixed Income of National Securities &
Research Corporation, and as portfolio manager for National Bond Fund, National
Asset Reserve, and National Multi-Sector Fixed Income Fund. Prior to National,
Mr. Dial managed high yield securities portfolios through Dial Capital
Management and various financial institutions. Mr. Dial also manages investments
for T.D. Partners, a limited partnership for which the Adviser serves as
subadviser.
Ernest Mysogland has served as portfolio manager of the Income and Growth Fund
since its inception in November 1993. Mr. Mysogland is a Vice President of the
Fund and Executive Vice President and Chief Investment Officer -- Equities of
the Adviser. Mr. Mysogland also serves as manager of the Northstar Income and
Growth Fund, and prior to February 1, 1996, served as a manager of the Northstar
Growth Fund, series of a separate open-end management investment company
sponsored by the Adviser. Prior to employment by the Adviser, Mr. Mysogland
served as Senior Vice President and Chief Investment Officer -- Equities for
National Securities and Research Corporation ("National"), and was portfolio
manager for National Income and Growth Fund, National Total Return Fund, and
National Worldwide Opportunities Fund. Prior to National, Mr. Mysogland served
as an investment manager for Reinoso Asset Management, Gintel Equity Management,
L.F. Rothschild Asset Management, Wertheim Asset Management and Kemper Financial
Services.
Geoffrey Wadsworth has served as portfolio manager of the Growth Fund since
January 1996 and served as co-manager of the Income and Growth Fund from
inception through January 1996. Mr. Wadsworth is a Vice President of the Funds
and the Adviser. He was formerly a Vice President of National, serving as
portfolio manager of the National Stock Fund, and assistant manager of
National's other equity funds.
Margaret D. Patel is the portfolio manager of the Government Securities Fund
and the Income Fund. Ms. Patel is a Vice President of the Funds and of the
Adviser and, prior to June 2, 1995, was Senior Vice President of BSC. She has
been primarily responsible for the day-to-day management of the Government
Securities Fund since 1988, and of the Income Fund since October 1995.
Prescott B. Crocker, C.F.A., is the portfolio manager of the High Yield Fund
and co-manager of the Strategic Income Fund. Mr. Crocker is a Vice President of
the Funds and of the Adviser and, until June 2, 1995, was Senior Vice President
and Director of Fixed Income Investments at BSC. Prior to joining BSC in 1993,
Mr. Crocker served for eighteen years in various capacities, including Group
Head for corporate and international fixed income, at Colonial Management
Associates, Inc. He has been primarily responsible for the day-to-day management
of the High Yield Fund since December 1993, and for the Strategic Income Fund
since its inception in 1994.
SUBADVISER; INVESTMENT PERSONNEL OF SUBADVISER. Navellier Fund Management,
Inc. ("Navellier"), a registered investment adviser, serves as subadviser to the
Special Fund pursuant to a Subadvisory Agreement dated February 1, 1996, between
the Adviser and Navellier. Navellier is a newly-formed company which is
wholly-owned by Louis G. Navellier. The principal address of Navellier is 920
Incline Way, Incline Village, NV 89450. Mr. Navellier, who has managed
investments since 1986, is also the sole shareholder of two other registered
investment advisory firms which, on a combined basis, manage approximately $1.2
billion of assets for individuals, institutions and a Navellier-sponsored
open-end management investment company, the Navellier Series Fund. Louis G.
Navellier will serve as portfolio manager for the Fund, with primary
responsibility for the day-to-day investment management. For its services,
Navellier will receive a fee equal to 0.48% of the average daily net assets of
the Fund. The Adviser is responsible for overseeing the investment management
provided by Navellier, and assumes all costs and expenses of the subadvisory
arrangement.
OTHER SERVICE PROVIDERS. The custodian for the Income and Growth and High
Total Return Funds is Custodial Trust Company, a bank organized under the laws
of New Jersey, located at 101 Carnegie Center, Princeton, New Jersey 08540-6231.
The custodian and fund accounting agent for the Special, Growth, Income, High
Yield, Strategic Income and Government Securities Funds is State Street Bank and
Trust Company, located at 225 Franklin Street, Boston, Massachusetts 02110. The
transfer agent and Blue Sky administrator
21
<PAGE>
for all Funds, and the fund accounting agent for the Income and Growth and High
Total Return Funds, is First Data Investor Services Group ("First Data" or the
"Transfer Agent"), located at One Exchange Place, Boston, Massachusetts, 02109.
Advest Transfer Services, Inc., One Commercial Plaza, 280 Trumbull Street,
Hartford, Connecticut 06103, serves as the sub-transfer agent for the Funds
offering Class T shares.
HOW TO PURCHASE SHARES
- ----------------------------------------------------------------------
Each Fund continuously offers three classes of shares. Each class is described
below under "Alternative Purchase Arrangements." Shares of each Fund, excluding
Class T shares, may be purchased from the Fund or from investment dealers having
a sales agreement with the Underwriter. Orders received in good form prior to
4:00 p.m. Eastern time or placed with a financial service firm before such time
and transmitted before the Fund processes that day's share transactions, will be
processed at that day's closing NAV, plus any applicable sales charge. The
minimum initial purchase is $2,500, except IRA accounts, for which the minimum
is $250; additional investments for as little as $100 ($25 for IRA accounts) may
be made at any time through an investment dealer or by sending a check payable
to The Northstar Advantage Funds, c/o First Data Investor Services, P.O. Box
9756, Providence, RI 02940, for the purchase of full and fractional shares. Most
shareholders choose not to hold their shares in certificate form because account
transactions such as exchanges and redemptions cannot be completed until the
certificate has been returned to the Funds and certificate holders may not
participate in certain shareholder services, such as telephone exchanges and
redemptions, check-writing and the withdrawal program. Certificates will be
issued only upon written request. Shareholders requesting certificates may incur
a fee for lost or stolen certificates and no certificates are issued for
fractional shares (which shares remain in the shareholder's account in book
entry form). The Fund or the Underwriter may refuse any purchase order for
shares.
At various times, the Underwriter implements programs under which (a) a
dealer's sales force may be eligible to win cash or material awards for certain
sales efforts or under which (b) the Underwriter will reallow an amount not
exceeding the total applicable sales charges on the sales generated by the
dealer during such programs to any dealer that (i) sponsors sales contests or
recognition programs conforming to criteria established by the Underwriter or
(ii) participates in sales programs sponsored by the Underwriter. Pursuant to a
Purchase Agreement that was entered into in connection with the assumption of
management of the Funds by the Adviser, the Underwriter has agreed to provide
Advest, Inc. ("Advest") with certain additional compensation until June 2, 1998.
Any additional compensation is payable annually and is based upon (a)(i) the
level of sales by Advest of shares of the Funds during each year and (ii) the
rate of redemption of Class T shares during such year and (b) the level of sales
of those Funds previously distributed through Advest by persons other than
Advest. Such compensation, which is paid out of the assets of the Underwriter
and not the Funds, is in addition to the compensation otherwise payable to a
dealer in connection with sale of the Funds' shares. Sales personnel of
broker-dealers distributing shares of the Funds may receive differing
compensation for selling different classes of shares.
ALTERNATIVE SALES ARRANGEMENTS
- ----------------------------------------------------------------------
The alternative purchase arrangements permit an investor to choose among three
methods (each a class) of purchasing shares. Each class is described below.
Which class is more beneficial to an investor depends on the amount and intended
length of the investment. Large investments qualifying for a reduced Class A
sales charge avoid the higher distribution fee. Investments in Class B and Class
C shares have 100% of the purchase invested immediately. Purchases of $250,000
or more must be for Class A shares. Please consult your financial service firm.
Prior to June 5, 1995, the Growth, Special, Income, Government Securities,
High Yield and Strategic Income Funds each offered only one Class of shares,
currently designated as "Class T" shares. Class T shares are no longer offered
for sale by a Fund, except in connection with reinvestment of dividends and
other distributions, upon exchanges of Class T shares of another Fund, and upon
exchange of shares from the Class T Account of the Money Market Portfolio. When
Class T shares are redeemed within four years after their purchase, a contingent
deferred sales load will be imposed at rates declining from a maximum of 4% of
the lesser of the net asset value or total cost of shares redeemed within a year
of purchase to 1% of such amount for shares redeemed after three years.
All contingent deferred sales charges are deducted from the redemption
proceeds, not the amount remaining in the account. No contingent deferred sales
charge is imposed on shares acquired through reinvestment of dividends and
distributions, or on amounts representing appreciation. In determining whether a
contingent deferred sales charge is applicable to a redemption, the calculation
22
<PAGE>
will be determined in the manner that results in the lowest possible rate being
charged. Accordingly, in determining whether a contingent deferred sales charge
will be payable and, if so, the percentage charge applicable, shares acquired
through reinvestment and then shares held the longest will be considered the
first to be redeemed.
Class B and Class T shares automatically convert to Class A shares after eight
years from purchase in the case of Class B shares, and on the later of May 31,
1998 or eight years after purchase in the case of Class T shares. The purpose of
the conversion is to relieve the holders from the burden of higher distribution
fees once the Underwriter had been reimbursed for most of its distribution
related expenses. For purposes of conversion to Class A shares, shares purchased
through the reinvestment of dividends and distributions paid in respect of Class
B or Class T shares in a shareholder's Fund account will be considered to be
held in a separate subaccount. Each time any Class B or Class T shares in the
shareholder's Fund account (other than those in the subaccount) convert to Class
A, an equal pro rata portion of the Class B or Class T shares in the subaccount
will also convert to Class A.
As set forth below, the initial or contingent deferred sales charges may be
reduced or eliminated for certain persons or organizations purchasing Fund
shares alone or in combination with other Northstar Advantage Funds. See the
Statement of Additional Information for more details regarding waivers and
purchases at net asset value.
Investors choosing the initial sales charge alternative may under certain
circumstances be entitled to pay reduced sales charges. The sales charge varies
with the size of the purchase and reduced charges apply to the aggregate of
purchases of a Fund made at one time by any "Purchaser," which term includes (i)
an individual and his/her spouse and their children under the age of 21, (ii) a
trustee or fiduciary purchasing for a single trust, estate or single fiduciary
account (including pension, profit-sharing or other employee benefit trusts
created pursuant to a plan qualified under Section 401 of the Internal Revenue
Code, a Simplified Employee Pension ("SEP"), Salary Reduction and other Elective
Simplified Employee Pension Accounts ("SARSEP")) and 403(b) and 457 plans,
although more than one beneficiary or participant is involved; and (iii) any
other organized group of persons, whether incorporated or not, provided the
organization has been in existence for at least six months and has some purpose
other than the purchase at a discount of redeemable securities of a registered
investment company. The circumstances under which "Purchasers" may pay reduced
sales charges are described below.
RIGHTS OF ACCUMULATION. A Purchaser may qualify for reduced initial sales
charges based upon the Purchaser's existing investment in shares of the Funds at
the time of purchase. The applicable sales charge is determined by aggregating
the dollar amount of the new purchase and the greater of the Purchaser's total
(i) net asset value or (ii) cost of all shares owned in the Funds sold subject
to a front-end sales charge and/or designated as "Class A" shares then held by
such Purchaser, and applying the sales charge applicable to such aggregate.
In order to obtain this discount, the Underwriter (if a purchase is made
through an investment dealer) or Transfer Agent (if made by mail) must be
provided with sufficient information, including the Purchaser's total cost at
the time of purchase, to permit verification that the Purchaser qualifies for a
cumulative quantity discount, and confirmation of the order is subject to such
verification. The privilege of cumulative quantity discounts may be modified or
discontinued at any time.
LETTER OF INTENT. Purchasers may also qualify for reduced sales charges by
signing a Letter of Intent ("LOI"). This enables the Purchaser to aggregate
purchases over a 13-month period of all Funds sold subject to a front-end sales
charge and/or designated as "Class A" shares. The sales charge is based on the
total amount invested during the 13-month period. A 90-day back-dated period can
be used to include earlier purchases (with a partial retroactive downward
adjustment in an amount equal to the commission paid to the broker-dealer); the
13-month period would then begin on the date of the first purchase during the
90-day period. No retroactive adjustment will be made if purchases exceed the
amount indicted in the LOI. A shareholder must notify the Transfer Agent
whenever a purchase is being made pursuant to a LOI.
The LOI is not a binding obligation on the investor to purchase the full
amount indicated; however, on the initial purchase, if required (or on
subsequent purchases if necessary), 5% of the dollar amount specified in the
Statement will be held in escrow by the Transfer Agent in shares registered in
the shareholder's name in order to assure payment of the proper sales charge. If
total purchases pursuant to the LOI (less any dispositions and exclusive of any
distributions on such shares automatically reinvested) are less than the amount
specified, the investor will be requested to remit to the Underwriter an amount
equal to the difference between the sales charge paid and the sales charge
applicable to the aggregate purchases actually made. If not remitted within 20
days after written request, an appropriate number of escrowed shares will be
redeemed in order to realize the difference.
CDSC WAIVERS. The contingent deferred sales charge is waived on redemptions
of Class B and Class C shares (a) following the death or disability, as defined
in Section 72(m)(7) of the Internal Revenue Code, of a shareholder if redemption
is made within one year of the death or disability of the shareholder, as
relevant; (b) in connection with redemptions of shares made pursuant to a
23
<PAGE>
shareholder's participation in any systematic withdrawal plan adopted by the
Funds provided, however, that such withdrawals shall not exceed in any calendar
year 7% (9% in the case of the High Total Return Fund and the High Yield Fund)
of the original principal amount invested (any excess being assessed the
applicable deferred sales charge, if any), and provided further that the
redeeming shareholder reinvests all dividends and capital gain distributions
during his/her participation in the withdrawal plan; (c) in connection with a
partial or complete redemption in connection with distributions under Individual
Retirement Accounts ("IRAs") or other qualified retirement plans in connection
with a lump-sum or other form of distribution following retirement, or after
attaining the age of 59 1/2 in the case of an IRA, Keogh plan or custodial
account pursuant to Section 403(b)(7) of the Internal Revenue Code, or on any
redemption resulting from the tax-free return of an excess contribution pursuant
to Section 408(d)(4) or (5) of the Code; and (d) in connection with the exercise
of certain exchange privileges among Class B or Class C shares of the Funds,
including shares of the Class B or Class C Account of the Money Market
Portfolio.
CLASS A SHARES. Class A shares are offered at net asset value plus an initial
or a contingent deferred sales charge as set forth below. Class A shares bear a
0.25% annual service fee and a .05% annual distribution fee.
<TABLE>
<CAPTION>
% OF NET % OF AMOUNT RETAINED BY
AMOUNT OFFERING DEALERS AS A % OF
AMOUNT PURCHASED INVESTED PRICE OFFERING PRICE
- ----------------------------------------------------------------------------- ----------- ----------- ---------------------
<S> <C> <C> <C>
Up to $99,999................................................................ 4.99% 4.75% 4.00%
$100,000 to 249,999.......................................................... 3.9 3.75 3.1
250,000 to 499,999........................................................... 2.83 2.75 2.3
500,000 to 999,999........................................................... 2.04 2 1.7
*1,000,000 and above......................................................... -- -- --
</TABLE>
- ------------------------
* The Underwriter pays investment dealers or financial service firms a
commission from its own resources of up to 1.00% of the amount invested for
amounts from $1,000,000 to $2,499,999, up to 0.50% on amounts of $2,500,000 to
$4,999,999 and up to 0.25% on amounts of $5 million and above. Purchases of
over $1 Million are subject to a maximum contingent deferred sales charge of
1% (scaled down to 0.50% for amounts of $2.5 million or more, and 0.25% on
amounts over $5 million) on redemptions made within eighteen months.
CLASS B SHARES. Class B shares are offered at net asset value, without an
initial sales charge, subject to a .75% annual distribution fee for
approximately 8 years (at which time they convert to Class A shares bearing only
a .05% annual distribution fee), a 0.25% annual service fee and a contingent
deferred sales charge if shares are redeemed within five years after purchase.
As set forth below, the amount of the deferred sales charge varies depending on
the number of years after purchase that the redemption occurs. For determining
the date of purchase, all payments during a month will be aggregated and deemed
to have been made on the last day of the month. The deferred sales charge will
be assessed on an amount equal to the lesser of the current market value or the
cost of the shares being redeemed.
The Underwriter currently pays investment dealers a sales commission of 4% of
the sale price of Class B shares sold by the dealers, subject to future
amendment or termination. The Underwriter will retain all or a portion of the
continuing distribution fee assessed to Class B shareholders and will receive
the entire amount of the contingent deferred sales charge paid by shareholders
on the redemption of shares to reimburse the Underwriter in whole or in part for
the payment of such sales commission, plus financing costs and related marketing
expenses.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
- ------------------------------------------------------------------------------------------------- -------------------
<S> <C>
First............................................................................................ 5%
Second........................................................................................... 4%
Third............................................................................................ 3%
Fourth........................................................................................... 2%
Fifth............................................................................................ 2%
Thereafter....................................................................................... 0%
</TABLE>
To provide an example, assume an investor purchased 100 shares at $10 per
share (at a cost of $1,000) and in the second year after purchase, the net asset
value per share is $12 and, during such time, the investor has acquired 10
additional shares upon dividend reinvestment. If, at such time the investor
makes his first redemption of 50 shares (proceeds of $600), 10 shares will not
be
24
<PAGE>
subject to charge because of dividend reinvestment. With respect to the
remaining 40 shares, the charge is applied only to the original cost of $10 per
share and not to the increase in net asset value of $2 per share. Therefore,
$400 of the $600 redemption proceeds will be charged at a rate of 4% (the
applicable rate in the second year after purchase).
CLASS C SHARES. Investors choosing Class C shares purchase shares at net
asset value without a sales charge at the time of purchase, subject to a 0.75%
annual distribution fee, a 0.25% annual service fee, and a 1.00% contingent
deferred sales charge on redemptions made within one year from the first day of
the month after purchase.
The Underwriter currently pays investment dealers a sales commission of 1% of
the sale price of Class C shares sold by such dealers, subject to future
amendment or termination. The Underwriter will retain the distribution fee
assessed against Class C shareholders in the first year of investment, and the
entire amount of the contingent deferred sales charge paid by Class C
shareholders upon redemption in year one, in order to compensate the Underwriter
for providing distribution related services to the Funds in connection with the
sale of Class C shares, and to reimburse the Underwriter in whole or in part for
the commissions (and any related financing costs) paid to dealers at the time of
purchase. There is no conversion feature associated with Class C shares;
therefore, Class C shareholders will be subject to the higher distribution fee
associated with such shares for the life of the shareholder's investment.
INVESTOR SERVICES AND ACCOUNT POLICIES
- ----------------------------------------------------------------------
An account will be opened for each investor after an initial investment is
made. Account services are described below. Class T shareholders wishing to add
to their investment or to purchase shares of another Fund must opt to purchase
Class A, Class B or Class C shares of the Fund, and the Transfer Agent will
establish a new account for the shareholder in another Class of a Fund selected
by the shareholder. Shares purchased will be held in the shareholder's account
by the Transfer Agent. Requests for account assistance or additional information
should be directed to Northstar at (800) 595-7827.
The Funds will send you a confirmation statement after every transaction that
affects your account balance or your account registration. Information regarding
the tax status of income dividends and capital gains distribution will be mailed
to shareholders on or before January 31st of each year. Account tax information
will also be sent to the IRS. Financial reports for the Funds will be mailed
semiannually to shareholders. To reduce expenses, only one copy of most Fund
reports will be mailed to accounts listed under the same social security number
or to households for multiple accounts with the same surname. Please contact
Northstar to request additional copies of shareholder reports.
DIVIDEND AND DISTRIBUTION REINVESTMENT OPTIONS. Shareholders of Class A,
Class B and Class C shares may direct that income dividends and capital gain
distributions be paid to them through any one of the following options: income
dividends and capital gain distributions both paid in additional shares of the
same class of a designated Fund at net asset value; income dividends paid in
cash and capital gain distributions paid in additional shares of the same class
of a designated Fund at net asset value; or income dividends and capital gain
distributions both paid in cash. If a shareholder does not indicate which option
is preferred upon the opening of an account, both income dividends and capital
gain distributions will be paid in additional shares of the Fund from which the
investor earned such distributions. Class T shareholders may elect only to
receive all distributions in cash or to reinvest in additional shares,
regardless of whether such distribution is an income dividend or a capital gains
distribution. In addition, Class T shareholders opting to reinvest dividends and
capital gains may only invest such proceeds in the Fund making the distribution.
Payment options may be changed at any time by notifying Northstar in writing.
AUTOMATIC INVESTMENT PLAN. Shareholders may elect to purchase shares through
the establishment of an Automatic Investment Plan, in which case the minimum
investment in order to open an account is $25. An Automatic Investment
Authorization Form (available on request from Northstar) provides for funds to
be automatically drawn on a shareholder's bank account and deposited in his or
her Fund account ($25 per month minimum). The shareholder's bank may charge a
nominal fee in connection with the establishment and use of automatic deposit
services. The Automatic Investment Plan is not available for Class T share
accounts.
WITHDRAWAL PROGRAM. A shareholder owning $5,000 or more worth of shares of a
Fund in book-entry form may establish a withdrawal program with the Fund and
provide for the payment monthly or quarterly of any requested dollar amount ($25
minimum per payment) from the account to his or her order. Withdrawal programs
are not available for Class T share accounts. A sufficient number of full and
fractional shares will be redeemed to make the designated payment. The purchase
of shares while participating in a withdrawal program will ordinarily be
disadvantageous to the investor, since a sales charge will be paid by the
investor on the
25
<PAGE>
purchase of shares at the same time the shares are being redeemed in the case of
Class A shares. For this reason, shareholders may not maintain an Automatic
Investment Plan while participating in the withdrawal program. In the case of
shares subject to a contingent deferred sales charge, unless the investor
qualifies for a waiver, the investor may incur a sales charge at the time of
each withdrawal. A Fund may terminate an investor's withdrawal program if the
account value falls below $5,000 due to the transfer or redemption of shares
from the account. See the enclosed application form.
TAX-SHELTERED RETIREMENT PLANS. Shares of the Funds may be offered in
connection with the following qualified prototype retirement plans: IRA and
Rollover IRA, SEP-IRA, Profit-Sharing and Money Purchase Pension Plans which can
be adopted by self-employed persons ("Keogh") and by corporations. Call or write
Northstar for further information.
EXCHANGE PRIVILEGES. Shareholders may exchange shares of a Fund for the same
class of shares of another Fund or for shares of The Cash Management Fund of
Salomon Brothers Investment Series (an open-end management investment company
comprised of various portfolios, hereafter referred to as "Money Market
Portfolio," that is not one of the Funds, but is available by purchase or
exchange through the Underwriter). Exchange requests in proper form will be
honored prior to 4:00 p.m. Eastern time. For telephone exchanges or
authorization forms, contact Northstar at 1-800-595-7827. Exchanges will be
based upon each Fund's NAV per share next computed following receipt of a
properly executed exchange request, without a sales charge; provided, however,
in the case of exchanges after a direct purchase into the Money Market Portfolio
from Class A shares of a Fund, a sales charge will be imposed in accordance with
the sales charge table that is applicable to direct purchases. Collection of the
contingent deferred sales charge will be deferred on shares subject to a charge
that are exchanged for shares of the same class of another Fund, or converted to
shares of the Money Market Portfolio. Under these circumstances, the combined
holding period of shares in each Fund, or in a Fund and the Money Market
Portfolio, shall be used to calculate the conversion period, if applicable, and
to determine the deferred sales charge due upon redemption, if any. The exchange
of shares from one Fund to another is treated as a sale of the exchanged shares
and a purchase of the acquired shares for Federal income tax purposes.
Shareholders may, therefore, realize a taxable gain or loss. See "Exchanges" and
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
Each Fund reserves the right to terminate or modify its exchange privileges at
any time upon prominent notice to shareholders. Such notice will be given at
least 60 days in advance. Each Fund and the Money Market Portfolio has different
investment objectives and policies. Shareholders should obtain and review the
prospectus of the Fund into which the exchange is to be made before any exchange
requests are made.
TELEPHONE TRANSACTIONS. Shareholders holding shares in book-entry form may
authorize the Funds to accept telephone redemptions and exchanges. Telephone
transactions are not available for Class T share accounts. Shareholders may
redeem up to $50,000 worth of their shares by telephoning Northstar prior to
4:00 p.m. Eastern time. Redemption proceeds must be payable to the record holder
of the shares and mailed to the shareholder's address of record or wire
transferred to the shareholder's account at a domestic commercial bank that is a
member of the Federal Reserve System, normally within one business day, but in
no event longer than three days after the request. The minimum amount for a wire
transfer is $1,000. If at any time the Funds shall determine that it is
necessary to terminate or modify telephone transaction privileges, shareholders
would be promptly notified. Information on these services is included in the
Application and is available from Northstar. Neither the Adviser, the
Underwriter nor the Funds will be liable for any loss, damages, expense or cost
arising out of any telephone transaction effected in accordance with the Funds'
procedures, upon instructions believed to be genuine. Shareholders who utilize
telephone privileges bear the risk of any loss, damages, expense or cost arising
from their election, including risk of unauthorized use; provided, however that
the Funds shall employ reasonable procedures to confirm that all telephone
instructions are genuine. For this purpose, the Fund or its agent will require
all individuals delivering telephone instructions to provide specific
information to identify themselves as the account holder, such as the name in
which the account is registered, the account holder's social security number,
account number, and broker of record. In the absence of such procedures, or
should the Fund or its agents for any reason fail to follow such procedures, the
Fund or its agents may be liable for losses due to unauthorized or fraudulent
telephone instructions.
INVOLUNTARY REDEMPTIONS. Due to the high cost of maintaining accounts with
small account values, each Fund reserves the right to close all accounts that
have been in existence for at least one year and have a value that is less than
$500. Shareholders will receive 60 days' written notice during which time they
may bring the value up to $500 or more. If the account value is not raised
during that time, the Fund will redeem all shares in the account and send the
proceeds to the shareholder's address of record.
Each Fund reserves the right to close all accounts of a shareholder who has
failed to provide a social security number or other taxpayer identification
number and certification (if required) that such number is correct, or if a
shareholder is deemed to engage in activities which are illegal or otherwise
detrimental to the Funds.
26
<PAGE>
REINSTATEMENT PRIVILEGE. Shareholders have a one time privilege of
reinstating their investment into any of the Funds, subject to the terms of
exchange (see "Exchange Privileges") at the NAV next determined after the
request for reinstatement is made. For Federal income tax purposes, a redemption
and reinstatement will be treated as a sale and purchase of shares; special
rules may apply in computing the amount of gain or loss in these situations. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
A written request for reinstatement must be received by the Underwriter within
30 days of the redemption accompanied by payment for the shares (not in excess
of the redemption). Shareholder accounts will be credited with an amount equal
to the deferred sales charge (or pro rata portion thereof) paid upon redemption.
HOW TO SELL SHARES
- ----------------------------------------------------------------------
Shareholders may sell their shares back to the Fund at the NAV next determined
after the Fund receives a redemption request with any other required
documentation in proper form. Investors will be subject to the applicable
deferred sales charge, if any, for such shares. The Transfer Agent requires a
written request, with the signature guaranteed by a bank, a national stock
exchange member or other eligible guarantor institution. The Transfer Agent may
waive the signature guarantee requirement in the case of book-entry share
redemption requests of less than $50,000 if the proceeds are payable to the
account as registered and mailed to the address of record. Redemption requests
must be signed by each person in whose name the account is registered.
Shareholders may also sell shares back to a Fund through dealers who are members
of the selling group. The redemption price in such a case will be the price as
of the close of the New York Stock Exchange on that day, provided the order is
received by the dealer prior to the close of the Exchange and is transmitted to
the Underwriter prior to the close of its business. The dealer is responsible
for the timely transmission of orders to the Underwriter. No service charge is
made by a Fund on redemptions, but shares tendered through investment dealers
may be subject to a service charge by such dealers. Payment for shares redeemed
is normally made within three days. However, for shares recently purchased by
check, the Fund cannot send proceeds until the check has cleared, which may take
up to 15 days.
Redemptions by corporations, partnerships or other organizations, executors,
administrators, trustees, custodians, guardians, or from IRA's or other
retirement plans may require additional documentation. To avoid delay in
redemption or transfer, shareholders having questions about specific
requirements, including eligible guarantor institutions, should contact
Northstar at (800) 595-7827. Redemption requests will not be honored until all
required documents in the proper form have been received.
DISTRIBUTION PLANS
- ----------------------------------------------------------------------
Each Fund has adopted a distribution plan under Rule 12b-1 of the 1940 Act for
each class of shares of that Fund (collectively, the "Plans"). The Plans permit
each Fund to compensate the Underwriter in connection with activities intended
to promote the sale of shares of each class of shares of the Fund. Pursuant to
the Plans, each Fund shall pay the Underwriter 0.30% annually of the average
daily net assets of each Fund's Class A shares, 1.00% annually of the average
daily net assets of each Fund's Class B and Class C shares, and 0.95% annually
of the average daily net assets of each Fund's Class T shares in the case of the
Growth Fund, Special Fund and Strategic Income Fund, 0.75% annually of the
average daily net assets of the Class T shares in the case of the Income Fund
and 0.65% annually of the average daily net assets of the Class T shares in the
case of the Government Securities Fund and High Yield Fund. Under the NASD
rules, fees of this type are limited to 0.75% annually for distribution fees and
0.25% annually for service fees, subject to aggregate limits. The Underwriter
uses the fee to defray the costs of commissions and service fees paid to
financial service firms which have sold Fund shares, and to defray other
expenses such as sales literature, prospectus printing and distribution,
shareholder servicing costs and compensation to wholesalers. Should the fees
exceed the Underwriter's expenses in any year, the Underwriter would realize a
profit. With respect to the Class T Plan, it is anticipated that all of the
payments received by the Underwriter under the Plan will be paid to Advest as
compensation for servicing Class T shareholder accounts and reimbursement for
its prior distribution and shareholder servicing activities in connection with
Class T shares.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- ----------------------------------------------------------------------
THE FOLLOWING DISCUSSION IS INTENDED FOR GENERAL INFORMATION ONLY. EACH
INVESTOR SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE TAX
CONSEQUENCES OF AN INVESTMENT IN A FUND.
Each Fund intends to continue to qualify annually and elect to be treated as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"). To qualify, each Fund must meet certain income, distribution and
diversification requirements. In any year in which a Fund qualifies as a
regulated investment company and timely distributes all of its taxable income,
the Fund generally will not pay any U.S. federal income or excise tax.
27
<PAGE>
Each Fund intends to distribute to shareholders substantially all of its net
investment income and any net capital gains at least annually. It is intended
that dividends from net investment income will be paid monthly on the High Total
Return Fund, the Government Securities Fund, the High Yield Fund and the
Strategic Income Fund, annually on the Special Fund, and quarterly on the Income
and Growth, Growth, and Income Funds' shares.
Dividends paid out of a Fund's investment company taxable income (including
dividends, interest and net short-term capital gains) will be taxable to a
shareholder as ordinary income. If a portion of the Fund's income consists of
dividends paid by U.S. corporations, a portion of the dividends paid by the Fund
may be eligible for the corporate dividends-received deduction. Distributions of
net capital gains (the excess of net long-term capital gains over net short-term
capital losses), if any, designated as capital gain dividends are taxable as
long-term capital gains, regardless of how long the shareholder has held the
Fund's shares. Dividends are taxable to shareholders in the same manner whether
received in cash or reinvested in additional Fund shares.
Each year the Fund will notify shareholders of the tax status of dividends and
distributions. Each Fund may be required to withhold U.S. federal income tax at
the rate of 31% of all taxable distributions payable to shareholders who fail to
provide the Fund with their correct taxpayer identification number or to make
required certifications, or who have been notified by the IRS that they are
subject to backup withholding.
Investors who purchase shares of a Fund just before the distribution will pay
full price for the shares and receive a portion of the purchase price back as a
taxable distribution. Unless your account is set up as a tax-deferred account,
dividends paid to you would be included in your gross income for tax purposes
even though you may not have participated in the increase in the net asset value
of the Fund. Further information relating to tax consequences is contained in
the Statement of Additional Information. Fund distributions also may be subject
to state, local and foreign taxes. Fund distributions that are derived from
interest on obligations of the U.S. Government and certain of its agencies,
authorities and instrumentalities may be exempt from state and local taxes in
certain states.
A distribution will be treated as paid on December 31 of the current calendar
year if it is declared by a Fund in October, November or December with a record
date in such a month and paid by the Fund during January of the following
calendar year. Such distributions will be taxable to shareholders in the
calendar year in which the distributions are declared, rather than the calendar
year in which the distributions are received.
Investments in zero coupon securities will result in income to a Fund each
year equal to a portion of the excess of the face value of the securities over
their issue price, even though the Fund receives no cash interest payments from
the securities.
Upon the sale or other disposition of shares of a Fund, a shareholder may
realize a capital gain or loss which will be long-term or short-term, generally
depending upon the shareholder's holding period for the shares.
GENERAL INFORMATION
- ----------------------------------------------------------------------
ORGANIZATION OF THE FUNDS. The Northstar Advantage Trust (the "Trust") and
each separate Fund is organized under Massachusetts law as a business trust. The
Trust was organized in 1993; the Special, Growth, Income and Government
Securities Funds in 1986; the High Yield Fund in 1989; and the Strategic Income
Fund in 1994. The Trust's Declaration of Trust, as amended, and each Fund's
Amended and Restated Declaration of Trust provides that the Trustees are
authorized to create an unlimited number of series and, with respect to each
series, to issue an unlimited number of full and fractional shares of one or
more classes and to divide or combine the shares into a greater or lesser number
of shares without thereby changing the proportionate beneficial interests in the
series. All shares have equal voting rights, except that only shares of the
respective series or separate classes within a series are entitled to vote on
matters concerning only that series or class. As of the date of this Prospectus,
each Fund within the Trust has three classes of shares; each of the remaining
Funds has four classes of shares.
Neither the Trust nor the Funds are required to hold shareholder meetings, but
special meetings may be called under certain circumstances. Meetings of the
shareholders will be called upon written request of shareholders holding in the
aggregate not less than 10% of the outstanding shares of the affected Fund or
class having voting rights.
REGISTRATION STATEMENT. This prospectus does not contain all the information
included in the Registration Statement filed for each Fund with the Securities
and Exchange Commission under the Securities Act of 1933 and the 1940 Act, with
respect to the securities offered hereby, certain portions of which have been
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. Each Registration Statement, including the exhibits filed therewith,
may be examined at the office of the Securities and Exchange Commission in
Washington, D.C.
28
<PAGE>
<TABLE>
<S><C>
[NORTHSTAR LOGO]
New Account Application
------------------------------------------------------------------------------------------------------------------------------
1 ACCOUNT REGISTRATION
------------------------------------------------------------------------------------------------------------------------------
Type of Account (Choose One Only):
/ / INDIVIDUAL / / JOINT ACCOUNT / / FOR A MINOR / / TRUST, CORPORATION, PARTNERSHIP OR OTHER ENTITY
USE LINE A USE LINES A & B USE LINE C USE LINE D
Print name exactly as account is to be registered:
A. - -
----------------------------------------------------------- -----------
NAME (FIRST, MIDDLE, LAST) SOCIAL SECURITY NUMBER
B. - -
----------------------------------------------------------- -----------
NAME (FIRST, MIDDLE, LAST) SOCIAL SECURITY NUMBER
C.
-----------------------------------------------------------
CUSTODIAN'S NAME (FIRST, MIDDLE, LAST)
- -
----------------------------------------------------------- -----------
MINOR'S NAME (FIRST, MIDDLE, LAST) MINOR'S SOCIAL SECURITY NUMBER
-
----------------------------------------------------------- -----------
TAX I.D. NUMBER
UNDER THE UNIFORM GIFTS/TRANSFERS TO MINORS ACT
------------- OR
NAME OF STATE
D.
----------------------------------------------------------- -----------
NAME (IF A TRUST, INCLUDE DATE OF AGREEMENT) - -
SOCIAL SECURITY NUMBER
------------------------------------------------------------------------------------------------------------------------------
2 MAILING ADDRESS
------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------
STREET
( )
-------------------------------------------------------------
DAYTIME PHONE NUMBER
-------------------------------------------------------------
CITY STATE ZIP
------------------------------------------------------------------------------------------------------------------------------
3 PURCHASE OF SHARES
------------------------------------------------------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT $2,500 / / MAKE CHECK PAYABLE TO NORTHSTAR ADVANTAGE FUNDS. Check enclosed for $
------------------
/ / Shares purchased and paid for through my/our investment dealer.
Trade Date Order#
---------- ----------
Number of Shares: Class A Class B Class C
---------- ---------- ----------
Please check the box beside the name of each Northstar Advantage Fund being purchased and enter the dollar amount of each
purchase. All distributions will be reinvested in additional shares unless instructed otherwise.
/ / INCOME FUND $ / / GROWTH FUND $ / / STRATEGIC INCOME FUND $
---------- ---------- ----------
Class A / / Class B / / Class C / / Class A / / Class B / / Class C / / Class A / / Class B / / Class C / /
DIVIDENDS / / Cash / / Other* DIVIDENDS / / Cash / / Other* DIVIDENDS / / Cash / / Other*
CAPITAL GAINS / / Cash / / Other* CAPITAL GAINS / / Cash / / Other* CAPITAL GAINS / / Cash / / Other*
- -----------------------------------------------------------------------------------------------------------------------------------
/ / HIGH YIELD FUND $ / / GOVERNMENT SECURITIES FUND $ / / SPECIAL FUND $
---------- ---------- ----------
Class A / / Class B / / Class C / / Class A / / Class B / / Class C / / Class A / / Class B / / Class C / /
DIVIDENDS / / Cash / / Other* DIVIDENDS / / Cash / / Other* DIVIDENDS / / Cash / / Other*
CAPITAL GAINS / / Cash / / Other* CAPITAL GAINS / / Cash / / Other* CAPITAL GAINS / / Cash / / Other*
- -----------------------------------------------------------------------------------------------------------------------------------
/ / INCOME AND GROWTH FUND $ / / HIGH TOTAL RETURN FUND $ / / MONEY MARKET PORTFOLIO $
---------- ---------- ----------
Class A / / Class B / / Class C / / Class A / / Class B / / Class C / / (Money Market Account)
Class A / / Class B / / Class C / /
DIVIDENDS / / Cash / / Other* DIVIDENDS / / Cash / / Other* DIVIDENDS / / Cash / / Other*
CAPITAL GAINS / / Cash / / Other* CAPITAL GAINS / / Cash / / Other* CAPITAL GAINS / / Cash / / Other*
- -----------------------------------------------------------------------------------------------------------------------------------
*Please reinvest my dividends from to
------------------ --------------------
(Name of Fund) (Name of Fund)
<PAGE>
------------------------------------------------------------------------------------------------------------------------------
4 LETTER OF INTENT, RIGHT OF ACCUMULATION (CLASS A SHARES ONLY)
------------------------------------------------------------------------------------------------------------------------------
LETTER OF INTENT
Although I/we have made no commitment to do so, I/we intend to invest the dollar amount indicated below within a 13-month
period in shares of one or more of the eligible Northstar Advantage Funds.
/ / $100,000 / / $250,000 / / $500,000 / / $1,000,000
RIGHTS OF ACCUMULATION
If this account qualifies for a Reduced Sales Charge under the terms of the current Prospectus, please list account
numbers:
/ / $100,000 / / $250,000 / / $500,000 / / $1,000,000
- -
--- ---------- --- ----------
------------------------------------------------------------------------------------------------------------------------------
5 AGREEMENTS AND SIGNATURES
------------------------------------------------------------------------------------------------------------------------------
I/We am/are of legal age and wish to establish an account in accordance with the terms and conditions of the current applicable
Prospectus, a copy of which has been received and read. I/We understand and agree that neither First Data nor the Northstar
Advantage Funds shall be held liable for any loss, liability, cost or expense for acting in accordance with this application,
or any section thereof. I/We acknowledge that the account(s) established by this application will be subject to the telephone
exchange and redemption privileges described in this current prospectus, unless indicated otherwise, with the understanding
that the Fund, Northstar and the Transfer Agent will not be able to verify the authenticity of any telephone or redemption
order received from persons other than registered representatives of Northstar Distributors, Inc. and that they will not be
liable for following telephone exchange or redemption instructions that prove to be fraudulent. Shareholders would bear the
loss resulting from instructions entered by an unauthorized third party.
Under penalties of perjury, I certify (1) that the number shown on this form is my correct taxpayer identification number and
(2) that I am not* subject to backup withholding as a result of a failure to report all interest or dividends, or the Internal
Revenue Service has notified me that I am no longer subject to backup withholding.
*If you are subject to backup withholding, please cross through the word "not" in part (2) above.
------------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL (OR CUSTODIAN) DATE
------------------------------------------------------------------------------------------------------------------------------
CO-OWNER (OR CORPORATE OFFICER, PARTNER OR TRUSTEE) DATE
------------------------------------------------------------------------------------------------------------------------------
(IF APPLICABLE, TRUSTEE) DATE
------------------------------------------------------------------------------------------------------------------------------
(IF APPLICABLE, TRUSTEE) DATE
------------------------------------------------------------------------------------------------------------------------------
6 FOR DEALER USE ONLY
------------------------------------------------------------------------------------------------------------------------------
We guarantee the signature(s) and legal capacity of the applicant(s) referred to herein, and in the case of a withdrawal
program we affirm that, in our opinion, the designated withdrawal is reasonable in view of the circumstances involved.
------------------------------------------------------------------------------------------------------------------------------
DEALER NAME (PLEASE PRINT CAREFULLY) DEALER NO.
------------------------------------------------------------------------------------------------------------------------------
AUTHORIZED SIGNATURE (MUST BE PROVIDED FOR WITHDRAWAL PROGRAMS, TELEPHONE REDEMPTIONS AND TELEPHONE EXCHANGES)
------------------------------------------------------------------------------------------------------------------------------
BRANCH NUMBER BRANCH ADDRESS
------------------------------------------------------------------------------------------------------------------------------
REP NAME (PLEASE PRINT CAREFULLY) FIRST AND LAST NAME PHONE NUMBER (IMPORTANT) REP NUMBER
( )
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------
Upon completion of the application, please
return with a check made payable to:
NORTHSTAR ADVANTAGE FUNDS,
C/O FIRST DATA Box 9756 Providence, RI 02940
------------------------------------------------
<PAGE>
SPECIAL ACCOUNT OPTIONS
------------------------------------------------------------------------------------------------------------------------------
7 AUTOMATIC INVESTMENT PLAN
------------------------------------------------------------------------------------------------------------------------------
Attach a VOIDED CHECK from your bank account and a check for an initial deposit to establish this plan (minimum $25).
Please complete the following information to invest automatically the dollar amount stated below on approximately the 15th
/ /, 30th / / or the 15th and 30th / /, of the month.
The applicant authorizes the Northstar Advantage Funds to draw monthly drafts on your bank account number_____ and use the
proceeds ($25 minimum) therefrom to purchase shares of Northstar Advantage
------------------- --------------------------
FUND NAME $ AMOUNT
Registered in the name(s) of
---------------------------------------------------------------------------------------------
RESTRICTIONS
Each purchase of shares will be made at the current offering price determined as of the close of business on the day on
which such purchase is made. Automatic investments may be discontinued by either Northstar Advantage Funds or the
purchaser upon 30 days written notice to the other.
The Northstar Advantage Funds reserves the right to cancel any transaction which was executed in reliance on a draft
authorized where the bank upon which the draft was drawn refused to make payment thereon for any reason.
ATTACH VOID CHECK HERE
------------------------------------------------------------------------------------------------------------------------------
8 WITHDRAWAL PROGRAM
------------------------------------------------------------------------------------------------------------------------------
A Withdrawal Plan is available on Class A shares (non-certificated shares only) provided the Fund being purchased has a value
of $5,000 or more.
Withdrawals with respect to Class B and Class C shares are limited (see the Prospectus) and are conditional upon dividends and
capital gains being automatically reinvested.
1. The amount of each payment shall be ($25 minimum)
--------- -------- --------- ----------
FUND NAME $ AMOUNT FUND NAME $ AMOUNT
2. Payments are to be made / / Monthly / / Quarterly / / Semi-Annually / / Annually on the / / 1st or / / 15th of the month
Choose one of the following methods of distribution.
/ / ACH Please have my payments electronically transferred to my bank. I have attached the required voided check and I have
verified that my bank is a member of the Automated Clearing House (ACH).
/ / MAIL Please have my payments mailed. I understand that the payments will be made payable to me and mailed to my account
mailing address unless a special designation is referenced below:
------------------------------------------------------------------------------------------------------------------------------
NAME (PLEASE PRINT CAREFULLY.)
------------------------------------------------------------------------------------------------------------------------------
STREET
------------------------------------------------------------------------------------------------------------------------------
CITY STATE ZIP CODE YOUR BANK ACCOUNT NUMBER
------------------------------------------------------------------------------------------------------------------------------
ATTACH VOID CHECK HERE
------------------------------------------------------------------------------------------------------------------------------
9 TELEPHONE EXCHANGE REDEMPTION AND EXPEDITED TELEPHONE REDEMPTION
------------------------------------------------------------------------------------------------------------------------------
Signature guarantees are required if: 1. Redemption is over $50,000.
2. Proceeds are to be sent to address other than record.
ALL SHAREHOLDERS AND THEIR DEALER REPRESENTATIVES WILL AUTOMATICALLY RECEIVE TELEPHONE EXCHANGE AND REDEMPTION PRIVILEGES,
(NON-CERTIFICATED SHARES ONLY) UNLESS AN ELECTION NOT TO RECEIVE THESE PRIVILEGES IS EXERCISED BELOW.
/ / DO NOT CODE MY / / DO NOT CODE MY
ACCOUNT FOR TELEPHONE ACCOUNT FOR TELEPHONE
EXCHANGE PRIVILEGE. REDEMPTION PRIVILEGE.
/ / PLEASE WIRE REDEMPTION PROCEEDS TO MY BANK. (I UNDERSTAND THE MINIMUM FOR WIRES IS $1,000.) MY VOIDED CHECK IS
ATTACHED.
</TABLE>
<PAGE>
APPENDIX
- --------------------------------------------------------------------------------
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND
RATINGS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally know as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations,
I.E., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Note: Moody's may apply numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
- --------------------------------------------------------------------------------
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S ("S&P") CORPORATE DEBT RATINGS
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB: Debt rated BBB is regarded as having adequate capacity to pay interest
and repay principal. Whereas it normally exhibits protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than for debt in higher-rated categories.
BB, B, CCC, CC, C: Debt rated BB, B, CCC, CC and C is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
CI: The rating CI is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
A-1
<PAGE>
[LOGO]
PRINCIPAL UNDERWRITER
Northstar Distributors, Inc.
Two Pickwick Plaza
Greenwich, CT 06830
INVESTMENT ADVISER
Northstar Investment Management Corporation
Two Pickwick Plaza
Greenwich, CT 06830
TRANSFER AGENT
First Data Investor Services Group
53 State Street
Boston, MA 02109-2873
1-800-595-7827
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and, if given or made, such information or representations must not
be relied upon. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
state in which, or to any person to whom it is unlawful to make such an offer.
Neither the delivery of this prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that information herein is correct at
any time subsequent to its date.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Expense Information............................. 2
Financial Highlights............................ 7
Investment Objectives and Policies of the
Funds.......................................... 12
Risk Factors.................................... 17
Other Investment Techniques..................... 18
Performance Information......................... 19
How Net Asset Value is Determined............... 20
Management of the Funds......................... 20
<CAPTION>
PAGE
---
<S> <C>
How to Purchase Shares.......................... 22
Alternative Sales Arrangements.................. 22
Investor Services and Account Policies.......... 25
How to Sell Shares.............................. 27
Distribution Plans.............................. 27
Dividends, Distributions and Taxes.............. 27
General Information............................. 28
Appendix........................................ A-1
</TABLE>
<PAGE>
FEBRUARY 29, 1996
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
NORTHSTAR ADVANTAGE HIGH YIELD FUND
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND
NORTHSTAR ADVANTAGE INCOME FUND
NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND
NORTHSTAR ADVANTAGE GROWTH FUND
NORTHSTAR ADVANTAGE SPECIAL FUND
Two Pickwick Plaza
Greenwich, Connecticut 06830
(203) 863-6200
(800) 595-7827
STATEMENT OF ADDITIONAL INFORMATION
Northstar Advantage Government Securities Fund, Northstar Advantage
Strategic Income Fund, Northstar Advantage High Yield Fund, Northstar Advantage
High Total Return Fund, Northstar Advantage Income Fund, Northstar Advantage
Income and Growth Fund, Northstar Advantage Growth Fund and Northstar Advantage
Special Fund (the "Funds") are open-end diversified management investment
companies, each with its own investment objective(s) and specific investment
goals. Each Fund is a separate investment company, except for the Northstar
Advantage High Total Return Fund and Northstar Advantage Income and Growth Fund,
each of which is a series of Northstar Advantage Trust, which is a separate
investment company.
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND ("GOVERNMENT SECURITIES FUND")
seeks to achieve a high level of current income and to conserve principal by
investing in debt obligations issued or guaranteed by the U.S. Government or its
agencies and instrumentalities.
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND ("STRATEGIC INCOME FUND") seeks to
achieve high current income by allocating its investments among the following
three sectors of the fixed income securities markets: debt obligations of the
U.S. Government, its agencies and instrumentalities; high yield, high risk,
lower-rated and nonrated U.S. and foreign fixed-income securities; and
investment grade debt obligations of foreign governments, their agencies and
instrumentalities. At least 20% shall, and up to 60% of the Fund's assets
may, be invested in each sector.
NORTHSTAR ADVANTAGE HIGH YIELD FUND ("HIGH YIELD FUND") seeks to achieve high
current income, primarily through investing in long-term and intermediate-term
high yield, high risk, lower rated and nonrated corporate debt instruments.
<PAGE>
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND ("HIGH TOTAL RETURN FUND") seeks to
achieve high income by investing primarily in high yield, lower rated U.S.
dollar-denominated debt securities. It is the Fund's policy, while investing
in income producing securities, also to maximize total return from a
combination of income and capital appreciation.
NORTHSTAR ADVANTAGE INCOME FUND ("INCOME FUND") seeks to realize income and,
secondarily, capital appreciation through investing in a balance of debt
securities, common and preferred stocks, and securities convertible into
common stock.
NORTHSTAR ADVANTAGE INCOME AND GROWTH FUND ("INCOME AND GROWTH FUND") seeks
current income balanced with the objective of achieving capital appreciation
through investments in a diversified group of securities selected for their
prospects of current yield and capital appreciation.
NORTHSTAR ADVANTAGE GROWTH FUND ("GROWTH FUND") seeks to achieve long-term
growth of capital by investing principally in common stocks selected for their
prospects for capital appreciation.
NORTHSTAR ADVANTAGE SPECIAL FUND ("SPECIAL FUND") seeks to achieve capital
appreciation through investment in a diversified portfolio of equity
securities selected for their potential for growth, primarily in small and
mid-capitalization companies.
There can be no assurance that a Fund will achieve its investment
objective(s). In general, the assets of each Fund are kept fully invested in
securities selected to meet the investment objective(s) of each Fund; however,
for temporary defensive purposes, any part of a Fund's assets may be held from
time to time in cash or cash equivalents. At such times when a Fund's assets
are invested for temporary defensive purposes, the Fund will not be investing in
accordance with its investment objective(s). THE HIGH TOTAL RETURN, HIGH YIELD
AND STRATEGIC INCOME FUNDS MAY NOT BE APPROPRIATE FOR ALL INVESTORS. (SEE "RISK
FACTORS" IN THE CURRENT PROSPECTUS.)
Northstar Investment Management Corporation (the "Adviser") is the
investment adviser for each Fund. Navellier Fund Management, Inc. (the
"Subadviser") is the subadviser for Special Fund. Northstar Distributors,
Inc. (the "Underwriter") is the underwriter to the Funds, and Northstar
Administrators Corporation is the Funds' administrator (the "Administrator").
The Underwriter and Administrator are affiliates of the Adviser.
This document is not the Prospectus of the Funds, but is incorporated
therein by reference and should be read in conjunction with the Prospectus,
dated February 29, 1996. Copies of the Prospectus may be obtained upon
request and without charge by contacting the Adviser at the address or phone
number above.
2
<PAGE>
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Northstar Advantage Trust . . . . . . . . . . . . . . . . . . . . . . . 5
Northstar Advantage Government Securities, Strategic Income, High
Yield, Income, Growth and Special Funds . . . . . . . . . . . . . . . . 7
OTHER INVESTMENT TECHNIQUES. . . . . . . . . . . . . . . . . . . . . . . . . 9
Derivative Instruments. . . . . . . . . . . . . . . . . . . . . . . . . 9
Privately Issued Collateralized Mortgage-Backed Obligations, Interest
Obligations and Principal Obligations . . . . . . . . . . . . . . 23
Index Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Additional Investment Techniques. . . . . . . . . . . . . . . . . . . . 25
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION. . . . . . . . . . . . . . . 31
SERVICES OF THE ADVISER AND ADMINISTRATOR. . . . . . . . . . . . . . . . . . 34
NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
PURCHASES AND REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 39
How to Obtain Reduced Sales Charges on Class A Shares . . . . . . . . . 40
Rights of Accumulation . . . . . . . . . . . . . . . . . . . . . . . . 40
Letter of Intent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
The Right of Redemption . . . . . . . . . . . . . . . . . . . . . . . . 41
Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Conversion Feature. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
DIVIDENDS, DISTRIBUTIONS AND TAXES . . . . . . . . . . . . . . . . . . . . . 43
UNDERWRITER AND DISTRIBUTION SERVICES. . . . . . . . . . . . . . . . . . . . 49
TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . 60
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Transfer Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Reports to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . 60
Organizational and Related Information. . . . . . . . . . . . . . . . . 61
3
<PAGE>
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Total Return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Non-Standardized Total Return . . . . . . . . . . . . . . . . . . . . . 63
OTHER INFORMATION CONCERNING FUND PERFORMANCE. . . . . . . . . . . . . . . . 65
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
4
<PAGE>
INVESTMENT RESTRICTIONS
The investment objective(s) of High Total Return Fund and Income and
Growth Fund, and certain of the investment restrictions of each of the Funds
are fundamental and cannot be changed without the approval of the holders of a
majority of the Funds' outstanding voting securities (defined in the
Investment Company Act of 1940 (the "1940 Act") as the lesser of (a) more than
50% of the outstanding shares or (b) 67% or more of the shares represented at
a meeting at which more than 50% of the outstanding shares are represented).
The investment objectives of the remaining Funds and all other investment
policies or practices are considered by the Funds to be non-fundamental and,
accordingly, may be changed without shareholder approval. Shareholders will be
notified at least thirty days in advance of a change in the objective of any
Fund, and will be notified of any other material changes. If a percentage
restriction on investments or use of assets set forth below is adhered to at
the time a transaction is effected, later changes in percentage resulting from
changing market values will not be considered a deviation from this policy.
NORTHSTAR ADVANTAGE TRUST
FUNDAMENTAL INVESTMENT POLICIES. Each of these Funds may not: (i)
borrow money, issue senior securities, or pledge, mortgage or hypothecate its
assets, except that it may: (a) borrow from banks but only if, immediately
after such borrowing there is asset coverage of 300%, and (b) enter into
transactions in options, futures, and options on futures (see "Other
Investment Techniques" in the Fund's Prospectus and in this Statement of
Additional Information ("SAI")) (the deposit of assets in escrow in
connection with the writing of covered put and call options and the purchase
of securities on a when-issued or delayed delivery basis and collateral
arrangements with respect to initial or variation margin deposits for futures
contracts will not be deemed to be pledges of the Fund's assets); (ii)
underwrite the securities of others; (iii) purchase or sell real property,
including real estate limited partnerships (each of these Funds may purchase
marketable securities of companies that deal in real estate or interests
therein, including real estate investment trusts); (iv) deal in commodities
or commodity contracts, except in the manner described in the current
Prospectus and SAI of the Fund; (v) make loans to other persons (but each of
these Funds may, however, lend portfolio securities, up to 33% of net assets
at the time the loan is made, to brokers or dealers of other financial
institutions not affiliated with the Fund or the Adviser, subject to
conditions established by the Adviser (See "Lending Portfolio Securities" in
this SAI), and may purchase or hold participations in loans, in accordance
with the investment objectives and policies of the Fund, as described in the
current Prospectus and SAI of the Fund; (vi) participate in any joint trading
accounts; (vii) purchase on margin (except that for purposes of this
restriction, the deposit or payment of initial or variation margin in
connection with futures contracts will not be deemed to be purchases of
securities on margin); (viii) sell short, except that these Funds may enter
into short sales against the box in the manner described in the current
Prospectus and SAI for the Fund; (ix) invest more than 25% of its assets in
any one industry or related group of industries; (x) purchase a security
(other
5
<PAGE>
than U.S. Government obligations) if, as a result, more than 5% of the value
of total assets of the Fund would be invested in securities of a single
issuer; or (xi) purchase a security if, as a result, more than 10% of any
class of securities, or more than 10% of the outstanding voting securities of
an issuer, would be held by the Fund.
NON-FUNDAMENTAL INVESTMENT POLICIES. These policies may be changed
without shareholder approval. These Funds may not: (i) invest in a security
if, as a result of such investment, more than 5% of its total assets (taken at
market value at the time of such investment) would be invested in securities
of issuers (other than issuers of federal agency obligations) having a record,
together with predecessors or unconditional guarantors, of less than three
years of continuous operation; (ii) purchase securities of other investment
companies, except in connection with a merger, consolidation or sale of
assets, and except that these Funds may purchase shares of other investment
companies, subject to such restrictions as may be imposed by the 1940 Act and
rules thereunder or by any state in which shares of the Fund are registered;
(iii) purchase or retain securities of any issuer if 5% of the securities of
such issuer are owned by those officers and directors or trustees of the Fund
or of the Adviser who each own beneficially more than 1/2 of 1% of its
securities; (iv) make an investment for the purpose of exercising control over
management; (v) invest more than 15% of its net assets (determined at the time
of investment) in illiquid securities, including securities subject to legal
or contractual restrictions on resale (which may include private placements
and those 144A securities for which the Trustees, pursuant to procedures
adopted by the Fund, have not determined there is a liquid secondary market),
repurchase agreements maturing in more than seven days, options traded over
the counter that a Fund has purchased, securities being used to cover options
a Fund has written, securities for which market quotations are not readily
available, or other securities that, legally or in the Adviser's or Trustees'
opinion, may be deemed illiquid; or (vi) invest in interests in oil, gas or
other mineral exploration development programs (including oil, gas or other
mineral leases).
These Funds, notwithstanding any other investment policy or limitation
(whether or not fundamental) set forth herein, may invest all of its assets in
the securities or beneficial interests of a singly-pooled investment fund having
substantially the same objective(s), policies and limitations as these Funds.
As a fundamental policy, these Funds may borrow money from banks to the
extent permitted under the 1940 Act. As an operating (non-fundamental)
policy, these Funds do not intend to borrow any amount in excess of 10% of
their respective assets, and would do so only for temporary emergency or
administrative purposes. In addition, to avoid the potential leveraging of
assets, neither of these Funds will make additional investments when its
borrowings, including those investment techniques which are regarded as a
form of borrowing, are in excess of 5% of total assets. If either of these
Funds should determine to expand its ability to borrow beyond the current
operating policy, the Fund's Prospectus would be amended and shareholders
would be notified.
6
<PAGE>
In addition to the restrictions described above, each of these Funds may,
from time to time, agree to additional investment restrictions for purposes of
compliance with the securities laws of those state and foreign jurisdictions
where that Fund intends to offer or sell its shares. Any such additional
restrictions that would have a material bearing on either of these Fund's
operations will be reflected in the Prospectus or a Prospectus supplement and
may require shareholder approval. In particular, the Trust has undertaken to
South Dakota to abide by certain limitations. Specifically, for those Fund(s)
in the Northstar Advantage Trust that do not invest more than 80% of assets in
debt securities, such Fund(s) shall not have more than 10% of total assets in
restricted securities (which, for purposes hereof, shall not include 144A
securities), or more than 10% of total assets in real estate investment trusts
or investment companies. Furthermore, these Funds will not invest in real
estate or interests therein, excluding readily marketable securities, or in
commodities futures or options.
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES, STRATEGIC INCOME, HIGH YIELD, INCOME,
GROWTH AND SPECIAL FUNDS
FUNDAMENTAL INVESTMENT POLICIES. These policies, which are identical for
each of these Funds, provide that these Funds may not: (i) borrow money, except
from a bank and as a temporary measure for extraordinary or emergency purposes,
provided the Fund maintains asset coverage of 300% for all borrowings; (ii)
purchase securities of any one issuer (except Government securities) if, as a
result, more than 5% of the Fund's total assets would be invested in that
issuer, or the Fund would own or hold more than 10% of the outstanding voting
securities of the issuer; PROVIDED, HOWEVER, that up to 25% of the Fund's total
assets may be invested without regard to these limitations; (iii) underwrite the
securities of other issuers, except to the extent that in connection with the
disposition of portfolio securities, the Fund may be deemed to be an
underwriter; (iv) concentrate its assets in the securities of issuers all of
which conduct their principal business activities in the same industry (this
restriction does not apply to obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities); (v) make any investment in real
estate, commodities or commodities contracts, except that these Funds may: (a)
purchase or sell readily marketable securities that are secured by interest in
real estate or issued by companies that deal in real estate, including real
estate investment and mortgage investment trusts; and (b) engage in financial
futures contracts and related options, as described herein and in the Fund's
Prospectus; (vi) make loans, except that these Funds may: (a) invest in
repurchase agreements, and (b) loan its portfolio securities in amounts up to
one-third of the market or other fair value of its total assets; and (vii) issue
senior securities, except as appropriate to evidence indebtedness that it is
permitted to incur, provided that the deposit or payment by the Fund of initial
or maintenance margin in connection with futures contracts and related options
is not considered the issuance of senior securities.
7
<PAGE>
NON-FUNDAMENTAL INVESTMENT POLICIES. Each of these Funds has adopted
certain investment restrictions that may be changed at any time by the Trustees
without a vote of shareholders.
These non-fundamental limitations provide that these Funds may not: (i)
borrow money in excess of 5% of its total assets (taken at market value); (ii)
pledge, mortgage or hypothecate in excess of 5% of its total assets (the deposit
or payment by a Fund of initial or maintenance margin in connection with futures
contracts and related options is not considered a pledge or hypothecation of
assets); (iii) purchase more than 10% of the voting securities of any one
issuer, except U.S. Government Securities; (iv) invest more than 15% of its net
assets in illiquid securities, including repurchase agreements maturing in more
than 7 days, that cannot be disposed of within the normal course of business at
approximately the amount at which the Fund has valued the securities, excluding
restricted securities that have been determined by the Trustees of the Fund (or
the persons designated by them to make such determinations) to be readily
marketable; (v) purchase securities of any issuer with a record of less than 3
years of continuous operations, including predecessors, except U.S. Government
Securities and obligations issued or guaranteed by any foreign government or its
agencies or instrumentalities, if such purchase would cause the investments of a
Fund in all such issuers to exceed 5% of the total assets of the Fund taken at
market value; (vi) purchase securities on margin, except these Funds may obtain
such short-term credits as may be necessary for the clearance of purchases and
sales of securities (the deposit or payment by a Fund of initial or maintenance
margin in connection with futures contracts or related options is not considered
the purchase of a security on margin); (vii) write put and call options, unless
the options are covered and the Fund invests through premium payments no more
than 5% of its total assets in options transactions, other than options on
futures contracts; (viii) purchase and sell futures contracts and options on
futures contracts, unless the sum of margin deposits on all futures contracts
held by the Fund, and premiums paid on related options held by the Fund, does
not exceed more than 5% of the Fund's total assets, unless the transaction meets
certain "bona fide hedging" criteria (in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be excluded in
computing the 5%); (ix) invest in securities of any issuer if any officer or
trustee of the Fund or any officer or director of the Fund's investment adviser
owns more than 1/2 of 1% of the outstanding securities of the issuer, and such
officers, directors and trustees own in the aggregate more than 5% of the
securities of such issuer; (x) invest in interests in oil, gas or other mineral
exploration or development programs (although it may invest in issuers that own
or invest in such interests); (xi) purchase securities of any investment
company, except by purchase in the open market where no commission or profit to
a sponsor or dealer results from such purchase, or except when such purchase,
though not made in the open market, is part of a plan of merger, consolidation,
reorganization or acquisition of assets; (xii) purchase more than 3% of the
outstanding voting securities of another investment company, invest more than 5%
of its total assets in another investment company, or invest more than 10% of
its total assets in other investment companies; (xiii) purchase warrants if, as
a result,
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warrants taken at the lower of cost or market value would represent more than 5%
of the value of the Fund's net assets or if warrants that are not listed on the
New York or American Stock Exchanges or on an exchange with comparable listing
requirements, taken at the lower of cost or market value, would represent more
than 2% of the value of the Fund's net assets (for this purpose, warrants
attached to securities will be deemed to have no value); or (xiv) make short
sales, unless, by virtue of its ownership of other securities, the Fund has the
right to obtain securities equivalent in kind and amount to the securities sold
and, if the right is conditional, the sale is made upon the same conditions,
except in connection with arbitrage transactions. The Strategic Income Fund,
additionally, may not invest in interests of real estate limited partnerships.
OTHER INVESTMENT TECHNIQUES
DERIVATIVE INSTRUMENTS
OPTIONS AND FUTURES STRATEGIES. The Adviser may at times seek to hedge
against a decline in the value of securities included in a Fund's portfolio or
an increase in the price of securities that it plans to purchase for a Fund
through the writing and purchase of options and the purchase and sale of
financial futures contracts and related options. Expenses and losses incurred
as a result of such hedging strategies will reduce the current return of the
Funds employing these hedging strategies. In addition, the Adviser may seek to
increase the current return of a Fund's portfolio by writing covered call or
secured put options.
The ability of the Funds to engage in options and futures strategies
described below will depend on the availability of liquid markets in such
instruments. Accordingly, no assurances can be given that the Funds will be
able to use these instruments effectively for the purposes stated below.
Options and futures transactions will involve certain risks that are described
below under "Risk Factors in Options Transactions" and "Risks of Transactions in
Futures Contracts and Related Options." The Funds will not engage in options
and futures transactions for leveraging purposes.
WRITING COVERED OPTIONS ON SECURITIES. Each Fund may write covered call
options and secured put options on securities of the types in which it is
permitted to invest from time to time as the Adviser determines is appropriate
in seeking to attain its investment objectives. Call options written by a Fund
give the holder the right to buy the underlying security from the Fund at a
stated exercise price; put options written by a Fund give the holder the right
to sell the underlying security to the Fund at a stated price.
Each of High Total Return Fund and Income and Growth Fund will not write
call options on when-issued securities. In addition, each of High Total Return
Fund and Income and Growth Fund will not write a covered call option if, as a
result, the aggregate market value of all portfolio securities of the Fund
covering call options or subject to put options exceeds 10% of the market value
of the Fund's net assets.
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Each of the Funds may only write call options on a covered basis or for
cross-hedging purposes. A call option is covered if the Fund owns or has the
right to acquire the underlying securities subject to the call option (or
comparable securities satisfying the cover requirements of securities exchanges)
at all times during the option period. A call option is for cross-hedging
purposes if it is not covered, but is designed to provide a hedge against
another security that the Fund owns or has the right to acquire. In the case of
a call written for cross-hedging purposes or a put option, the Fund will
maintain, in a segregated account at its custodian bank, cash or short-term U.S.
Government Securities, or, in the case of the Strategic Income Fund, short-term
debt obligations, with a value equal to or greater than the Fund's obligation
under the option. Each of the Funds may also write combinations of secured puts
and covered calls on the same underlying security.
A Fund will receive a premium from writing an option, which increases the
Fund's return in the event the option expires unexercised, or is terminated at a
profit. The amount of the premium will reflect, among other things, the
relationship of the market price of the underlying security to the exercise
price of the option, the term of the option, and the volatility of the market
price of the underlying security. By writing a call option, a Fund will limit
its opportunity to profit from any increase in the market value of the
underlying security above the exercise price of the option. By writing a put
option, a Fund will assume the risk that it may be required to purchase the
underlying security for an exercise price higher than its then-current market
price, resulting in a potential capital loss if the purchase price exceeds the
market price plus the amount of the premium received.
A Fund may terminate an option that it has written prior to its expiration
by entering into a closing purchase transaction in which it purchases an option
having the same terms as the option written. The Fund will realize a profit (or
loss) from such transaction if the cost of such transaction is less (or more)
than the premium received from the writing of the option. Because increases in
the market price of a call option will generally reflect increases in the market
price of the underlying security, any loss resulting from the repurchase of a
call option may be offset in whole or in part by unrealized appreciation of the
underlying security owned by the Fund.
When a Fund writes a call option but does not own the underlying security,
and when it writes a put option, the Fund may be required to deposit cash or
securities with its broker as "margin", or collateral, for its obligation to buy
or sell the underlying security. As the value of the underlying security
varies, the Fund may have to deposit additional margin with the broker.
PURCHASING PUT AND CALL OPTIONS ON SECURITIES. Each Fund may purchase put
options to protect its portfolio holdings in an underlying security against a
decline in market value. This protection is provided during the life of the put
option since the Fund, as holder of the put, is able to sell the underlying
security at the exercise price
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regardless of any decline in the underlying security's market price. For the
purchase of a put option to be profitable, the market price of the underlying
security must decline sufficiently below the exercise price to cover the premium
and transaction costs. By using put options in this manner, any profit that the
Fund purchasing the put option might otherwise have realized on the underlying
security will be reduced by the premium paid for the put option and by
transaction costs.
A Fund may also purchase a call option to hedge against an increase in
price of a security that it intends to purchase. This protection is provided
during the life of the call option since the Fund, as holder of the call, is
able to buy the underlying security at the exercise price regardless of any
increase in the underlying security's market price. For the purchase of a call
option to be profitable, the market price of the underlying security must rise
sufficiently above the exercise price to cover the premium and transaction
costs. By using call options in this manner, any profit that the Fund
purchasing the call option might have realized had it bought the underlying
security at the time it purchased the call option will be reduced by the premium
paid for the call option and by transaction costs.
Each Fund, except for High Total Return Fund and Income and Growth Fund, is
restricted from purchasing put or call options if, as a result of any such
transaction, the aggregate cost of options held by a Fund at the time of such
transaction would exceed 5% of the total assets of such Fund.
SHORT SALES. Each of High Total Return Fund and Income and Growth Fund may
make short sales "against the box." A short-sale is a transaction in which a
party sells a security it does not own in anticipation of decline in the market
value of that security. A short sale is "against the box" to the extent that a
Fund contemporaneously owns or has the right to obtain securities identical to
those sold short.
When a Fund makes a short sale, it must borrow the security sold short and
deliver it to the broker-dealer through which it made the short sale as
collateral for its obligation to deliver the security upon conclusion of the
sale. The Fund may have to pay a fee to borrow particular securities, and is
often obligated to pay over any accrued interest on such borrowed securities.
OVER-THE-COUNTER OPTIONS. Over-the-counter ("OTC") options are purchased
from or sold to dealers or financial institutions that have entered into direct
agreements with a Fund. The Staff of the Division of Investment Management of
the Securities and Exchange Commission (the "SEC") has taken the position that
OTC options purchased by a Fund are illiquid securities. Although the Staff has
indicated that it is continuing to evaluate this issue, pending further
developments, the Funds intend to enter into OTC options transactions only with
primary dealers in U.S. Government Securities and, in the case of OTC options
written by a Fund, only pursuant to an agreement that will assure that the Fund
will at all times have the right to repurchase the option written by it from the
dealer at a specified formula price. The Fund will treat the amount by which
such
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formula price exceeds the amount, if any, by which the option may be
"in-the-money" as an illiquid investment. The Adviser monitors the
creditworthiness of dealers with whom a Fund enters into OTC option transactions
under the general supervision of the Trustees of the Funds. If the transaction
dealer fails to make or take delivery of the U.S. Government securities
underlying an option it has written in accordance with the terms of the option
as written, the Funds would lose the premium paid for the option as well as any
anticipated benefit of the transaction. It is the present policy of the Funds
not to enter into any OTC option transaction if, as a result, more than 15% of
the Fund's net assets would be invested in (i) illiquid investments (determined
under the foregoing formula) relating to OTC options written by the Fund, (ii)
OTC options purchased by the Fund, (iii) securities that are not readily
marketable, and (iv) repurchase agreement maturing in more than seven days.
STOCK INDEX OPTIONS. Each of High Total Return Fund and Income and Growth
Fund may purchase stock index options to hedge against risks of broad price
movements in the equity markets that, in some market environments, may correlate
more closely with movements in the value of lower rated bonds than with changes
in interest rates. When a Fund sells an option on a stock index, it will have to
establish a segregated account with its custodian in which the Fund will deposit
cash or cash equivalents or a combination of both in an amount equal to the
market value of the option, and will have to maintain the account while the
option is open. For some options, no liquid secondary market may exist or the
market may cease to exist.
RISK FACTORS IN OPTIONS TRANSACTIONS. The successful use of a Fund's
options strategies depends in large part on the ability of the Adviser to
forecast correctly interest rate and market movements. For example, if a Fund
were to write a call option based on the Adviser's expectation that the price of
the underlying security would fall, but the price rose instead, the Fund could
be required to sell the security upon exercise at a price below the current
market price. Similarly, if a Fund were to write a put option based on the
Adviser's view that the price of the underlying security would rise, but the
price fell instead, the Fund could be required to purchase the security upon
exercise at a price higher than the current market price.
When a Fund purchases an option, it runs the risk that it will lose its
entire investment in the option in a relatively short period of time, unless the
Fund exercises the option or enters into a closing sale transaction before the
option's expiration. If the price of the underlying security does not rise (in
the case of a call) or fall (in the case of a put) to an extent sufficient to
cover the option premium and transaction costs, the Fund will lose part or all
of its investment in the option. This contrasts with an investment by the Fund
in the underlying security, since the Fund will not realize a loss if the
security's price does not change.
The effective use of options also depends on a Fund's ability to terminate
option positions at times when the Adviser deems it desirable to do so. There
is no assurance
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that a Fund will be able to effect closing transactions at any particular time
or at an acceptable price.
If a secondary market in options were to become unavailable, the Funds
could no longer engage in closing transactions. Lack of investor interest might
adversely affect the liquidity of the market for particular options or series of
options. A market may discontinue trading of a particular option or options
generally. In addition, a market could become temporarily unavailable if
unusual events, such as volume in excess of trading or clearing capability, were
to interrupt its normal operations.
A market may at times find it necessary to impose restrictions on
particular types of options transactions, such as opening transactions. For
example, if an underlying security ceases to meet qualifications imposed by the
market or the Options Clearing Corporation, new series of options on that
security will no longer be opened to replace expiring series, and opening
transactions in existing series may be prohibited. If an options market were to
become unavailable, a Fund, as a holder of an option would be able to realize
profits or limit losses only by exercising the option, and the Fund, as option
writer, would remain obligated under the option until expiration or exercise.
Disruptions in the markets for the securities underlying options purchased
or sold by a Fund could result in losses on the options. If trading is
interrupted in an underlying security, the trading of options on that security
is normally halted as well. As a result, the Fund as purchaser or writer of an
option will be unable to close out its positions until options trading resumes,
and it may be faced with considerable losses in trading if the security reopens
at a substantially different price. In addition, the Options Clearing
Corporation, or other options markets, may impose exercise restrictions. If a
prohibition on exercise is imposed at the time when trading in the option has
also been halted, the Fund, as purchaser or writer of an option, will be locked
into its position until one of the two restrictions has been lifted. If the
Options Clearing Corporation were to determine that the available supply of an
underlying security appears insufficient to permit delivery by the writers of
all outstanding calls in the event of exercise, it may prohibit indefinitely the
exercise of put options. The Fund, as holder of such a put option, could lose
its entire investment if the prohibition remained in effect until the put
option's expiration.
Special risks are presented by internationally-traded options. Because of
time differences between the United States and various foreign countries, and
because different holidays are observed in different countries, foreign options
markets may be open for trading during hours or on days when United States
markets are closed. As a result, option premiums may not reflect the current
prices of the underlying interest in the United States.
FUTURES CONTRACTS. Each Fund may enter into futures contracts. The Funds
will enter into these transactions solely for the purpose of hedging against the
effects of changes in the value of its portfolio securities or those it intends
to purchase due to
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anticipated changes in interest rates and currency values, and not for the
purpose of speculation. A futures contract to sell, for example, a debt
security or foreign currency (a "Short" futures position), creates an obligation
by the seller to deliver a specified amount of the underlying security at a
certain future time and price. A futures contract to purchase a debt security
or foreign currency (a "long" futures position) creates an obligation by the
purchaser to take delivery of a specified amount of the underlying security at a
certain future time and price. The specific instruments delivered or taken,
respectively, at the settlement date are not determined until on or near that
date. The determination is made in accordance with the rules of the exchange on
which the futures contract sale or purchase was made. Futures contracts are
traded in the United States only on commodity exchanges or boards of trade,
known as "contract markets," approved for such trading by the Commodity Futures
Trading Commission (the "CFTC"), and must be executed through a futures
commission merchant or brokerage firm that is a member of the relevant contract
market.
Although futures contracts by their terms call for actual delivery or
acceptance of commodities or securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery.
Closing out a futures contract sale is effected by purchasing a futures contract
for the same aggregate amount of the specific type of financial instrument or
commodity with the same delivery date. If the price of the initial sale of the
futures contract exceeds the price of the offsetting purchase, the seller is
paid the difference and realizes a gain. Conversely, if the price of the
offsetting purchase exceeds the price of the initial sale, the seller realizes a
loss. Similarly, the closing out of a futures contract purchase is effected by
the purchaser's entering into a futures contract sale. If the offsetting sale
price exceeds the purchase price, the purchaser realizes a gain, and if the
purchase price exceeds the offsetting sale price, he realizes a loss. In
general, 40% of the gain or loss arising from the closing out of a futures
contract traded on an exchange approved by the CFTC is treated as short-term
gain or loss, and 60% is treated as long-term gain or loss.
A Fund may sell, for example, interest rate futures contracts in
anticipation of an increase in the general level of interest rates. Generally,
as interest rates rise, the market value of the securities held by the Funds
will fall, thus reducing their net asset value. This interest rate risk can be
reduced without employing futures as a hedge by selling such securities and
either reinvesting the proceeds in securities with shorter maturities or by
holding assets in cash. However, this strategy entails increased transaction
costs in the form of dealer spreads and brokerage commissions and would
typically reduce the Fund's average yield as a result of the shortening of
maturities.
The sale of interest rate futures contracts provides a means of hedging
against rising interest rates. As rates increase, the value of a Fund's short
position in the futures contracts will also tend to increase, thus offsetting
all or a portion of the depreciation in the market value of the Fund's
investments that are being hedged. While the Fund will incur commission
expenses in selling and closing out futures positions (which is done by
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taking an opposite position in the futures contract), commissions on futures
transactions tend to be lower than transaction costs incurred in the purchase
and sale of portfolio securities.
INTEREST RATE FUTURES CONTRACTS. Each Fund may enter into interest rate
futures contracts. An interest rate futures contract provides for the future
sale and purchase of a specified amount of a certain debt security at a stated
date, place and price. The Funds may enter into interest rate futures contracts
to protect against fluctuations in interest rates affecting the value of debt
securities that a Fund either holds or intends to acquire. Interest rate
futures contracts currently are based on long-term Treasury Bonds, Treasury
Notes, three-month Treasury Bills and Government National Mortgage Association
modified pass-through mortgage-backed securities ("GNMA pass-through
securities"), and 90-day commercial paper. If a Fund invests in tax-exempt
securities issued by a governmental entity, the Fund may purchase and sell
futures contracts and related options on U.S. Treasury securities when, in the
opinion of the Adviser, price movements in Treasury security futures and related
options will correlate closely with price movements in the tax-exempt securities
that are the subject of the hedge.
INDEX FUTURES CONTRACTS. Each Fund may enter into stock index futures
contracts. An index futures contract is a contract to buy or sell units of an
index at a specified future date at a price agreed upon when the contract is
made. Entering into a contract to buy units of an index is commonly referred to
as buying or purchasing a contract or holding a long position in the index.
Entering into a contract to sell units of an index is commonly referred to as
selling a contract or holding a short position. A unit is the current value of
the index. A Fund may enter into stock index futures contracts, debt index
futures contracts, or other index futures contracts appropriate to its
objective. A Fund may also purchase and sell options on index futures
contracts.
For example, the Standard & Poor's ("S&P") Composite 500 Stock Price Index
("S&P 500") is composed of 500 selected common stocks, most of which are listed
on the New York Stock Exchange. The S&P 500 assigns relative weightings to the
common stocks included in the Index, and the value fluctuates with changes in
the market values of those common stocks. In the case of the S&P 500, contracts
are to buy or sell 500 units. Thus, if the value of the S&P 500 were $150, one
contract would be worth $75,000 (500 units x $150). The stock index futures
contract specifies that no delivery of the actual stocks making up the index
will take place. Instead, settlement in cash must occur upon the termination of
the contract, with the settlement being the difference between the contract
price and the actual level of the stock index at the expiration of the contract.
For example, if a Fund enters into a futures contract to buy 500 units of the
S&P 500 at a specified future date at a contract price of $150 and the S&P 500
is at $154 on that future date, the Fund will gain $2,000 (500 units x gain of
$4). If a Fund enters into a futures contract to sell 500 units of the stock
index at a specified future date at a contract price of $150 and the S&P 500 is
at $152 on that future date, the Fund will lose $1,000 (500 units x loss of $2).
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FOREIGN CURRENCY FUTURES CONTRACTS. High Total Return Fund, Income and
Growth Fund and Strategic Income Fund may enter into foreign currency futures
contracts on domestic and foreign exchanges. A foreign currency futures
contract provides for the future sale and purchase of a specified amount of a
certain foreign currency at a stated date, place and price. The Funds may
enter into foreign currency futures contracts to attempt to establish the rate
at which it would be entitled to make a future exchange of United States
dollars for another currency. At present, foreign currency futures contracts
are based on British pounds, German deutschmarks, Canadian dollars, Japanese
yen, French francs, Swiss francs, and ECUs.
OPTIONS ON INTEREST RATE FUTURES CONTRACTS. The Funds may purchase and
sell put and call options on interest rate futures contracts as a hedge against
changes in interest rates, in lieu of purchasing and writing options directly on
the underlying security or purchasing and selling the underlying futures
contracts. The purchase of an option on an interest rate futures contract will
give the Funds the right to enter into a futures contract to purchase (in the
case of a call option) or to enter into a futures contract to sell (in the case
of a put option) a particular debt security at a specified exercise price at any
time prior to the expiration date of the option.
OPTIONS ON FOREIGN CURRENCY FUTURES. High Total Return Fund, Income and
Growth Fund and Strategic Income Fund may purchase and sell put and call options
on foreign currency futures. The purchase of options on foreign currency
futures contracts gives each Fund the right to enter into a futures contract to
purchase (in the case of a call option) or to sell (in the case of a put option)
a particular currency at a specified price at any time during the period before
the option expires. Options on foreign currency futures currently are available
with respect to British pounds, German deutsche marks and Swiss francs. The
Funds may purchase options on foreign currency futures as a hedge against
fluctuating currency values. A Fund may use options on futures contracts in
lieu of purchasing or writing options directly on the underlying securities or
purchasing and selling the underlying futures. For example, to hedge against a
possible decrease in the value of its portfolio securities, a Fund may purchase
put options or write call options on futures contracts rather than sell futures
contracts. Similarly, a Fund may purchase call options or write put options on
futures contracts, rather than purchase such futures, to hedge against possible
increases in the price of debt securities that the Fund intends to purchase.
Such options generally operate in the same manner as options purchased or
written directly on the underlying investments. The potential loss related to
the purchase of an option on a futures contract is limited to the premium paid
for the option plus related transaction costs. A call option sold by a Fund
exposes the Fund during the term of the option to the possible loss of an
opportunity to realize appreciation in the market price of the underlying
security or to the possible continued holding of a security that might otherwise
have been sold to protect against depreciation in the market price of the
security. In selling puts, there is a risk that a Fund may be required to buy
the underlying security at a disadvantageous price. Options on interest rate
futures contracts currently are available with respect to Treasury Bonds,
Treasury
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Notes, and Eurodollars.
OPTIONS ON INDEX FUTURES. Options on index futures are similar to options
on securities except that options on index futures give the purchaser the right,
in return for the premium paid, to assume a position in an index futures
contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. The delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the accumulated
balance in the writer's futures margin account, which represents the amount by
which the market price of the index futures contract, at exercise, exceeds (in
the case of a call) or is less than (in the case of a put) the exercise price of
the option on the index futures. If an option is exercised on the last trading
day prior to its expiration date, the settlement will be made entirely in cash
equal to the difference between the exercise price of the option and the closing
level of the index of options. Those who fail to exercise their options prior
to the exercise date suffer a loss of the premium paid.
OPTIONS ON INDICES. As an alternative to purchasing call and put options
on index futures, a Fund may purchase and sell call and put options on the
underlying indices themselves. Such options would be used in a manner identical
to the use of options on index futures.
LIMITATIONS AND OTHER REQUIREMENTS RELATING TO FUTURES AND RELATED OPTIONS.
A Fund will not purchase or sell futures contracts or options on futures
contracts or indices if, as a result, the sum of the margin deposits on its
existing futures contracts and related options positions and premiums paid for
options on futures contracts would exceed 5% of the Fund's total assets. For
each long position that High Total Return Fund, Income and Growth Fund or
Strategic Income Fund enters into, it will segregate cash or cash equivalents
having a value equal to the market value of the contract as collateral with the
custodian of the Fund. For the remaining Funds, with respect to each futures
contract purchased or long position in an option, the Fund will set aside in a
segregated account at its custodian bank an amount of cash or short term U.S.
Government Securities equal to the total market value of such contracts less the
initial margin deposited therefor.
The High Total Return Fund and Income and Growth Fund will not use leverage
when entering into long futures contracts or related options. Each of the
remaining Funds will sell futures contracts only to offset expected declines in
the value of portfolio securities, and the value of such futures contracts will
not exceed the total market value of those securities (plus such additional
amount as may be necessary because of differences in the volatility factor of
the portfolio securities vis-a-vis the futures contracts).
Unlike when a Fund purchases or sells a security, no price is paid or
received by a Fund upon the purchase or sale of a futures contract. Upon
entering into a contract, the Fund is required to deposit with its custodian in
a segregated account in the name of the
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futures broker an amount of cash and/or U.S. Government Securities, equal to
approximately 1% to 5% of the contract price, which amount is subject to change
by the exchange on which the contract is traded or by the broker. This amount
is known as "initial margin." The nature of initial margin in futures
transactions is different from that of margin in securities transactions in that
futures contract margin does not involve the borrowing of funds to finance the
transactions. Rather, initial margin is similar to a performance bond or good
faith deposit that is returned to the Fund upon termination of the futures
contract, assuming all contractual obligations have been satisfied. Futures
contracts also involve brokerage costs.
Subsequent payments, called "variation margin" or "maintenance margin" to
and from the broker (or the custodian) are made on a daily basis as the price of
the underlying security or commodity fluctuates, making the long and short
positions in the futures contract more or less valuable. This is known as
"marking to the market." For example, when a Fund has purchased a futures
contract on a security and the price of the underlying security has risen, that
position will have increased in value and the Fund will receive from the broker
a variation margin payment based on that increase in value. Conversely, when a
Fund has purchased a security futures contract and the price of the underlying
security has declined, the position would be less valuable and the Fund would be
required to make a variation margin payment to the broker. Similar requirements
relating to the payment of initial and variation margin apply to parties
engaging in options on futures transactions.
A Fund may elect to close some or all of its futures positions at any time
prior to their expiration in order to reduce or eliminate a hedge position then
currently held by the Fund. The Fund may close its positions by taking opposite
positions, which will operate to terminate the Fund's position in the futures
contracts. Final determinations of variation margin are then made; additional
cash is required to be paid by or released to the Fund, and the Fund realizes a
loss or a gain. Such closing transactions involve additional commission costs.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. Successful
use of futures contracts by a Fund is subject to the Adviser's ability to
predict movements in the direction of interest rates and other factors affecting
securities markets. For example, if a Fund has hedged against the possibility
of decline in the values of its investments and the values of its investments
increase instead, the Fund will have lost part or all of the benefit of the
increase through payments of daily maintenance margin. A Fund may have to sell
investments at a time when it may be disadvantageous to do so in order to meet
margin requirements.
The use of options and futures involves the risk of imperfect correlation
between movements in options and futures prices and movements in the price of
securities that are the subject of the hedge. The successful use of these
strategies also depends on the ability of the Adviser to forecast correctly
interest rate movements and general stock
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market price movements. The risk increases as the composition of the portfolio
of a Fund using these strategies diverges from the composition of the relevant
option or futures contract.
Compared to the purchase or sale of futures contracts, the purchase of call
or put options on futures contracts involves less potential risk to a Fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss to a Fund when
the purchase or sale of a futures contract would not, such as when there is no
movement in the prices of the hedged investments. The writing of an option on a
futures contract involves risks similar to those risks relating to the sale of
futures contracts.
There is no assurance that higher than anticipated trading activity or
other unforeseen events might not, at times, render certain market clearing
facilities inadequate, and thereby result in the institution by exchanges of
special procedures that may interfere with the timely execution of customer
orders.
The effective use of options and futures strategies by a Fund depends,
among other things, on the Fund's ability to terminate options and futures
positions at times when the Adviser deems it desirable to do so. Although a
Fund will not enter into an option or futures position unless the Adviser
believes that a liquid market exists for such option or future, there can be no
assurance that the Fund will be able to effect closing transactions at any
particular time or at an acceptable price. The Funds generally expect that
their options and futures transactions will be conducted on recognized
securities exchanges. In certain instances, however, a Fund may purchase and
sell options in the over-the-counter market. The Staff of the SEC considers
over-the-counter options and securities underlying them to be illiquid. A
Fund's ability to terminate option positions established in the over-the-counter
market may be more limited than in the case of exchange-traded options and may
also involve the risk that securities dealers participating in such transactions
would fail to meet their obligations to the Fund.
For instance, to reduce or eliminate a hedge position held by a Fund, the
Fund may seek to close out a position. The ability to establish and close out
positions will be subject to the development and maintenance of a liquid
secondary market. It is not certain that this market will develop or continue
to exist for particular futures contracts or options. Reasons for the absence
of a liquid secondary market on an exchange include the following: (i) there may
be insufficient trading interest in certain contracts or options; (ii)
restrictions may be imposed by an exchange on opening transactions or closing
transactions or both; (iii) trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or series of contracts or options,
or underlying securities; (iv) unusual or unforeseen circumstances may interrupt
normal operations on an exchange; (v) the facilities of an exchange or a
clearing corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges
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could, for economic or other reasons, decide or be compelled at some future date
to discontinue the trading of contracts or options (or a particular class or
series of contracts or options), in which event the secondary market on that
exchange for such contracts or options (or in the class or series of contracts
or options) would cease to exist, although outstanding contracts or options on
the exchange that had been issued by a clearing corporation as a result of
trades on that exchange would continue to be exercisable in accordance with
their terms.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Each of High Total Return Fund,
Income and Growth Fund and Strategic Income Fund may engage in foreign currency
exchange transactions to hedge against uncertainty in the level of future
exchange rates. The Funds may conduct currency exchange transactions on a
"spot" (i.e., cash) basis at the rate then prevailing in the currency exchange
market, or on a forward basis, by entering into futures or forward contracts to
purchase or sell currency. A Fund's dealings in foreign currency exchange
contracts is limited to hedging.
FORWARD FOREIGN CURRENCY CONTRACTS. A forward foreign currency contract
involves an obligation to purchase or sell a specific currency at a future date,
which may be any fixed number of days from the date of the contract as agreed
upon by the parties, at a price set at the date of the contract. Forward
currency contracts are entered into in the interbank market on a principal basis
directly between currency dealers, which usually are large commercial banks and
brokerage houses, and their customers, and, therefore, generally involve no
margin, commissions or other fees. Forward currency contracts will establish a
rate of exchange that can be achieved in the future and thus involve the risk of
loss due to a decline in the value of the hedged currency increases.
OPTIONS ON FOREIGN CURRENCY. Each of High Total Return Fund, Income and
Growth Fund and Strategic Income Fund may also purchase and sell put and call
options for the purpose of hedging against changes in future currency exchange
rates. An option on a foreign currency gives the purchasers, in return for a
premium paid plus related transaction costs, the right to sell (in the case of a
put option) or to buy (in the case of a call option) the underlying currency at
a specified price until the option expires. The value of an option on foreign
currency depends upon the value of the foreign currency when compared to the
value of the United States dollar.
Currency options traded on United States or other exchanges may be subject
to position limits, which may affect the ability of the Fund to hedge its
positions. The Funds will purchase and sell options on foreign exchanges to the
extent permitted by the CFTC.
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The Funds may purchase or sell options on currency only when the Adviser
believes that a liquid secondary market exists for these options; however, no
assurance can be given that a liquid secondary market will exist for a
particular option at any specific time.
RISKS OF FOREIGN CURRENCY TRANSACTIONS. Foreign currency futures contracts
and related options, forward foreign currency contracts and options on foreign
currency may be traded on foreign exchanges. The regulation of transactions on
these exchanges may be less extensive than the regulation of United States
exchanges. The funds will trade only those options approved by the CFTC.
Transactions on foreign exchanges also may not involve a clearing mechanism and
related guarantees, and may be subject to the risk of governmental actions
affecting trading in, or the prices of, foreign securities. The value of such
positions also could be affected adversely by: (1) foreign, political, legal and
economic factors; (2) a lack of information on which to make trading decisions
compared to that which is available in the United States; (3) a delay in the
ability to act on significant events occurring in the foreign markets during
non-business hours in the United States, (4) different exercise and settlement
terms from those imposed in the United States; and (5) less trading volume than
occurs on United States exchanges.
In addition, foreign exchanges offer less protection against defaults in
the forward trading of currencies than is available on United States exchanges.
Because a forward foreign currency contract is not guaranteed by an exchange or
clearinghouse, a default on the contract would deprive the Fund of unrealized
profits or would force the Fund to cover its commitments for purchase of resale,
if any, at the current market price.
The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved is not generally
possible since the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of those securities
between the dates the currency exchange transactions are entered into and the
dates they mature.
It is impossible to forecast precisely the market value of portfolio
securities at the expiration or maturity of a forward or futures contract.
Accordingly, it may be necessary for a Fund to purchase additional foreign
currency on the spot market (and bear the expense of such purchase) if the
market value of the security or securities being hedged is less than the amount
of foreign currency the Fund is obligated to deliver and a decision is made to
sell the security or securities and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency received upon the sale of the portfolio security or securities if the
market value of such security or securities exceeds the amount of foreign
currency the Fund is obligated to deliver.
A Fund's currency hedging transactions may call for the delivery of one
foreign currency in exchange for another foreign currency and may at times not
involve
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currencies in which its Portfolio securities are then denominated. The Adviser
will engage in such "cross hedging" activities when it believes that such
transactions provide significant hedging opportunities for the Fund. Cross
hedging transactions by the Fund involve the risk of imperfect correlation
between changes in the values of the currencies to which such transactions
relate and changes in the value of the currency or other asset or liability that
is the subject of the hedge.
A holder of a put option on a currency has the right, on or before a
specified date, to sell to the other party to the contract a specified amount of
a currency for a specified price measured in another currency. A holder of a
call option on a currency has a similar right to buy a specified amount of a
currency from the other party. The Fund pays a purchase price (called a
"premium") when it initially acquires the currency option. Currency options
are traded primarily in the over-the-counter market, although options on foreign
currencies have recently been listed on several exchanges. Options are traded
not only on the currencies of individual countries, but also on the European
Currency Unit ("ECU"). The ECU is composed of amounts of a number of
currencies, and is the official medium of exchange of the European Union's
European Monetary System.
Currency options involve a number of risks. These include the risk, in the
case of over-the-counter options, that the other party will default on its
obligations. Such a default could deprive the Strategic Income Fund of the
expected benefits of the hedging transaction and could result in expenses and
delays if the Fund seeks to pursue remedies against the defaulting party.
Another risk associated with options is that, if anticipated currency price
movements do not occur, the Strategic Income Fund may never exercise its rights
under the option, in which case the option will expire worthless and the Fund
will not recover the value of the premium it paid to acquire the option.
Options on currencies are affected by many of the same factors that
influence exchange rates and investments generally. The value of any currency,
including U.S. dollars and foreign currencies, may be affected by political and
economic factors applicable to the issuing country. The exchange rates of
foreign currencies (and therefore the values of foreign currency options) may be
affected significantly, fixed, or supported directly or indirectly by U.S. and
foreign government actions. Government intervention may increase the risk
involved in purchasing or selling foreign currency options, since exchange rates
may not be free to fluctuate in response to other market forces.
The value of a foreign currency option reflects the value of an exchange
rate, which in turn reflects the relative values of two currencies, the U.S.
dollar and the particular foreign currency involved. Because foreign currency
transactions occurring in the interbank market involve substantially larger
amounts than those that may be
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involved in the exercise of foreign currency options, investors may be
disadvantaged by having to deal in an odd lot market for the underlying foreign
currencies in connection with options at prices that are less favorable than for
round lots. Foreign government restrictions or taxes could result in adverse
changes in the cost of acquiring or disposing of foreign currencies.
There is no systematic reporting or last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
round-lot transactions in the interbank market and thus may not reflect exchange
rates for smaller odd-lot transactions (less than $1 million) where rates may be
less favorable. The interbank market in foreign currencies is a 24-hour a day,
global market. To the extent the options markets are closed while the markets
for the underlying currencies are open, significant price and rate movements may
take place in the underlying markets that cannot be reflected in the options
markets.
PRIVATELY ISSUED COLLATERALIZED MORTGAGE-BACKED OBLIGATIONS, INTEREST
OBLIGATIONS AND PRINCIPAL OBLIGATIONS
Each of High Total Return Fund and Income and Growth Fund may invest up to
5% of its net assets in Privately Issued Collateralized Mortgage-Backed
Obligations ("CMOs"), Interest Obligations ("IOs") and Principal Obligations
("POs") when the Adviser believes that such investments are consistent with the
Fund's investment objective. Collateralized mortgage obligations or "CMOs" are
debt obligations collateralized by mortgage loans or mortgage pass-through
securities. Typically, privately issued CMOs are collateralized by Ginnie Mae,
Fannie Mae or Freddie Mac Certificates, but also may be collateralized by whole
loans or private pass-throughs (such collateral collectively hereinafter
referred to as "Mortgage Assets"). Privately issued CMOs are per se illiquid.
Multi-class pass-through securities are equity interest in a trust composed of
Mortgage Assets. Unless the context indicates otherwise, all references herein
to CMOs include multi-class pass-thorough securities. Payments of principal of
and interest on the Mortgage Assets, and any reinvestment income thereon, are
the source of funds used to pay debt service on the CMOs or make scheduled
distribution on the multi-class pass-through securities.
On a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche", is issued at a specific
fixed or floating coupon rate and has a stated maturity or final distribution
date. Principal prepayments on the Mortgage Assets may cause the CMOs to be
retired substantially earlier than their stated maturities or final distribution
dates. The principal of and interest on the Mortgage Assets may be allocated
among the several classes of a series of a CMO in innumerable ways. The Funds
may also invest in, among others, parallel pay CMOs and Planned Amortization
Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to provide payments
of principal on each payment date to more than one class. These
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simultaneous payments are taken into account in calculating the stated maturity
date or final distribution date of each class, which, as with other CMO
structures, must be retired by its stated maturity date or final distribution
date but may be retired earlier. PAC Bonds generally call for payments of a
specified amount of principal on each payment date.
Stripped mortgage-backed securities ("SMBS") are derivative multi-class
mortgage securities. SMBS may be issued by agencies or instrumentalities of the
U.S. government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing.
SMBS are structured with two or more classes of securities that receive
different proportions of the interest and principal distributions on a pool of
Mortgage Assets. A common type of SMBS will have at least one class receiving
only a small portion of the interest and a larger portion of the principal from
the Mortgage Assets, while the other classes will receive primarily interest and
only a small portion of the principal. In the most extreme case, one class will
receive all of the interest (the interest-only or "IO" class), while the other
class will receive all of the principal (the principal-only or "PO" class). The
yield to maturity on an IO class is extremely sensitive to the rate of principal
payments (including prepayments) on the related underlying Mortgage Assets, and
a rapid rate of principal payments may have a material adverse effect on such
security's yield to maturity. If the underlying Mortgage Assets experience
greater than anticipated prepayments of principal, a Fund may fail to recoup
fully its initial investment in these securities. The determination of whether
a particular government-issued IO or PO backed by fixed-rate mortgage is liquid
is made by the Adviser under guidelines and standards established by the Board
of Trustees. Such a security may be deemed liquid if it can be disposed of
promptly in the ordinary course of business at a value reasonably close to that
used in the calculation of net asset value per share.
INDEX WARRANTS
The Strategic Income Fund may purchase put warrants and call warrants whose
values vary depending on the change in the value of one or more specified
securities indices ("index warrants"). Index warrants are generally issued by
banks or other financial institutions and give the holder the right, at any time
during the term of the warrant, to receive upon exercise of the warrant a cash
payment from the issuer, based on the value of the underlying index at the time
of exercise. In general, if the value of the underlying index rises above the
exercise price of the index warrant, the holder of a call warrant will be
entitled to receive a cash payment from the issuer upon exercise, based on the
difference between the value of the index and the exercise price of the warrant;
if the value of the underlying index falls, the holder of a put warrant will be
entitled to receive a cash payment from the issuer upon exercise, based on the
difference between the exercise price of the warrant and the value of the index.
The holder of a
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warrant would not be entitled to any payments from the issuer at any time when,
in the case of a call warrant, the exercise price is greater than the value of
the underlying index, or, in the case of a put warrant, the exercise price is
less than the value of the underlying index. If the Strategic Income Fund were
not to exercise an index warrant prior to its expiration, then the Fund would
lose the amount of the purchase price paid by it for the warrant. The Strategic
Income Fund will normally use index warrants in a manner similar to its use of
options on securities indices. The risks of the Fund's use of index warrants
are generally similar to those relating to its use of index options. Unlike
most index options, however, index warrants are issued in limited amounts and
are not obligations of a regulated clearing agency, but are backed only by the
credit of the bank or other institution that issues the warrant. Also, index
warrants generally have longer terms than index options. Although the Strategic
Income Fund will normally invest only in exchange-listed warrants, index
warrants are not likely to be as liquid as certain index options backed by a
recognized clearing agency. In addition, the terms of index warrants may limit
the Fund's ability to exercise the warrants at such time, or in such quantities,
as the Fund would otherwise wish to do.
ADDITIONAL INVESTMENT TECHNIQUES
REPURCHASE AGREEMENTS. Repurchase agreements are agreements under which a
Fund buys a money market instrument and obtains a simultaneous commitment from
the seller to repurchase the instrument at a specified time and at an agreed-
upon yield. The Adviser will use standards set by the relevant Fund's Trustees
in reviewing the creditworthiness of parties to repurchase agreements with such
Fund. In addition, no more than an aggregate of 15% of a Fund's net assets, at
the time of investment, will be invested in illiquid investments, including
repurchase agreements having maturities longer than seven days. In the event of
failure of the executing bank or broker-dealer, a Fund could experience some
delay in obtaining direct ownership of the underlying collateral and might incur
a loss if the value of the security should decline, as well as costs in
disposing of the security.
Pursuant to an Exemptive Order under Section 17(d) and Rule 17d-1 obtained
by the Funds, excluding the Strategic Income Fund and the Northstar Advantage
Trust, on March 5, 1991, such Funds may deposit uninvested cash balances into a
single joint account to be used to enter into repurchase agreements.
As an alternative to using repurchase agreements, a Fund may, from time to
time, invest up to 5% of its assets in money market investment companies
sponsored by a third party for short-term liquidity purposes. Such investments
are subject to the non-fundamental investment limitations described herein.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLL AGREEMENTS. The Funds may
enter into reverse repurchase agreements and dollar roll agreements. Under a
reverse repurchase
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agreement or a dollar roll agreement, a Fund sells securities and agrees
to repurchase them, or substantially similar securities in the case of a
dollar roll agreement, at a mutually agreed upon date and price. At the time
the Fund enters into a reverse repurchase or dollar roll agreement, it will
establish and maintain a segregated account with its Custodian, containing cash,
U.S. government securities, or other liquid assets from its portfolio, having a
value not less than the repurchase price (including accrued interest). The
Funds do not account for dollar rolls as a borrowing.
These agreements may involve the risk that the market value of the
securities to be repurchased by a Fund may decline below the price at which
the Fund is obligated to repurchase. Also, in the event the buyer of
securities under a reverse repurchase agreement or a dollar roll agreement
files for bankruptcy or becomes insolvent, such buyer or its trustee or
receiver may receive an extension of time to determine whether to enforce the
Fund's obligation to repurchase the securities, and the Fund's use of the
proceeds of the reverse repurchase agreement or the dollar roll agreement may
effectively be restricted pending such a decision.
LENDING PORTFOLIO SECURITIES. A Fund may lend portfolio securities to
broker-dealers and other financial institutions in an amount up to one-third of
the value of its total assets, provided that such loans are callable at any time
by the Fund and are at all times secured by collateral held by the Fund at least
equal to the market value, determined daily, of the loaned securities. A Fund
will continue to receive any income on the loaned securities, while
simultaneously earning interest on cash collateral (which will be invested in
short-term debt obligations) or a securities lending fee (in the case of
collateral in the form of U.S. Government Securities).
There may be risks of delay in recovery of the loaned securities and, in
some cases, loss of rights in the collateral should the borrower of the
securities fail financially. Loans of portfolio securities will only be made to
firms considered by the Adviser to be creditworthy under guidelines adopted by
the Trustees.
FIRM COMMITMENTS AND WHEN-ISSUED SECURITIES. Each Fund may enter into firm
commitment agreements to purchase securities at an agreed-upon price on a
specified future date. An amount of cash or short-term U.S. Government
Securities equal to the Fund's commitment will be deposited in a segregated
account at the Fund's custodian bank to secure the Fund's obligation. Although
a Fund will generally enter into firm commitments to purchase securities with
the intention of actually acquiring the securities for its portfolio (or for
delivery pursuant to options contracts it has entered into), the
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Fund may dispose of a security prior to settlement if the Adviser deems it
advisable to do so. A Fund entering into the forward commitment may realize
short-term gains or losses in connection with such sales.
A Fund may enter into To Be Announced ("TBA") sale commitments wherein the
unit price and the estimated principal amount are established upon entering into
the contract, with the actual principal amount being within a specified range of
the estimate. A Fund will enter into TBA sale commitments to hedge its portfolio
positions or to sell mortgage-backed securities it owns under delayed delivery
arrangements. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, the Fund will maintain, in a segregated account, cash or high-grade
debt obligations in an amount sufficient to meet the purchase price. Unsettled
TBA sale commitments are valued at current market value of the underlying
securities. If the TBA sale commitment is closed through the acquisition of an
offsetting purchase commitment, the Fund realizes a gain or loss on the
commitment without regard to any unrealized gain or loss on the underlying
security. If the Fund delivers securities under the commitment, the Fund
realizes a gain or loss from the sale of the securities, based upon the unit
price established at the date the commitment was entered into.
A Fund may also purchase securities on a when-issued or delayed delivery
basis. In such transactions, the price is fixed at the time the commitment to
purchase is made, but delivery and payment for the securities take place at a
later date, normally within one month. The value of the security on the
settlement date may be more or less than the price paid as a result of, among
other things, changes in the level of interest rates or other market factors.
Accordingly, there is a risk of loss, which is in addition to the risk of
decline in the value of the Fund's other assets. The Fund will establish a
segregated account with its custodian in which it will maintain cash and
marketable securities equal in value to commitments for when-issued or delayed
delivery securities. While when-issued or delayed delivery securities may be
sold prior to the settlement date, it is intended that a Fund will purchase such
securities with the purpose of actually acquiring them, unless a sale appears
desirable for investment reasons.
FLOATING OR VARIABLE RATE INSTRUMENTS. The Funds may purchase floating or
variable rate bonds, which normally provide that the holder can demand payment
of the obligation on short notice at par with accrued interest. Such bonds are
frequently secured by letters of credit or other credit support arrangements
provided by banks. Floating or variable rate instruments provide for
adjustments in the interest rate at specified intervals (weekly, monthly,
semiannually, etc.). A Fund would anticipate using these bonds as cash
equivalents, pending longer term investment of its funds. Other longer term
fixed-rate bonds, with a right of the holder to request redemption at certain
times (often annually, after the lapse of an intermediate term), may also be
purchased by a Fund. These bonds are more defensive than conventional long-term
bonds (protecting to some degree against a rise in interest rates), while
providing greater opportunity than
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comparable intermediate term bonds since the Fund may retain the bond if
interest rates decline. By acquiring these kinds of bonds, a Fund obtains the
contractual right to require the issuer of the security, or some other person
(other than a broker or dealer), to purchase the security at an agreed upon
price, which right is contained in the obligation itself rather than in a
separate agreement with the seller or some other person.
ZERO COUPON SECURITIES. Zero coupon securities are fixed income securities
that have been stripped of their unmatured interest coupons. Zero coupon
securities are sold at a (usually substantial) discount and redeemed at face
value at their maturity date without interim cash payments of interest or
principal. The amount of this discount is accredited over the life of the
security, and the accretion constitutes the income earned on the security for
both accounting and tax purposes. Because of these features, the market prices
of zero coupon securities are generally more volatile than the market prices of
securities that have a similar maturity but that pay interest periodically.
Zero coupon securities are likely to respond to a greater degree to interest
rate changes than are non-zero coupon securities with similar maturity and
credit qualities. Each Fund may invest a portion of its total assets in "zero
coupon" Treasury securities, which consist of Treasury bills or stripped
interest or principal components of U.S. Treasury bonds or notes.
Zero coupon Treasury bonds or notes consist of stripped interest or
principal components held in STRIPS form issued through the U.S. Treasury's
STRIPS program, which permits the beneficial ownership of the component to be
recorded directly in the Treasury book-entry system. The Funds may also
purchase custodial receipts evidencing beneficial ownership of direct interests
in component parts of U.S. Treasury bonds or notes held by a bank in a custodian
or trust account.
ADDITIONAL INFORMATION ON GNMAS. The Funds may invest in U.S. Government
securities, which are obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities. A substantial portion of the assets of the
Government Securities Fund have, at various times, been invested in obligations
of the Government National Mortgage Association (popularly called GNMAs or
Ginnie Maes). All of the other Funds may also invest in GNMAs from time to
time.
GNMAs are mortgage backed securities representing part ownership of a pool
of mortgage loans, in which the timely payment of principal and interest is
guaranteed by the full faith and credit of the U.S. Government. GNMA may borrow
U.S. Treasury funds to the extent needed to make payments under the guarantee.
The Funds purchase "modified pass-through" type GNMA Certificates for which
principal and interest are guaranteed, rather than the "straight pass through"
Certificates for which such guarantee is not available. The Funds also purchase
"variable rate" GNMA Certificates and may purchase other types that may be used
with GNMA's guarantee.
When mortgages in the pool underlying a GNMA Certificate are prepaid by
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mortgagors or when foreclosure occurs, such principal payments are passed
through to the Certificate holders (such as a Fund). Accordingly, the life of
the GNMA Certificate is likely to be substantially shorter than the stated
maturity of the mortgages in the underlying pool, which will have maturities of
up to 30 years. Because of such variation in prepayment rights, it is not
possible to accurately predict the life of a particular GNMA Certificate.
Payments to holders of GNMA Certificates consist of the monthly
distributions of interest and principal, less the GNMA and issuer's fees. The
portion of the monthly payment that represents a return of principal may be
reinvested by a Fund holding the GNMA in then-available GNMA obligations, which
may bear interest at a rate higher or lower than the obligation from which the
payment was received, or in a differing security. The actual yield to be earned
by the holder of a GNMA Certificate is calculated by dividing such payments by
the purchase price paid for the GNMA Certificate (which may be at a premium or a
discount from the face value of the Certificate). Unpredictable prepayments of
principal, however, can greatly change realized yields. In a period of
declining interest rates it is more likely that mortgages contained in GNMA
pools will be prepaid, thus reducing the effective yield. Moreover, any premium
paid on the purchase of a GNMA Certificate will be lost if the obligation is
prepaid. In periods of falling interest rates, this potential for prepayment
may reduce the general upward price increase of GNMA Certificates that might
otherwise occur. As with other debt instruments, the price of GNMA Certificates
is likely to decrease in times of rising interest rates. Price changes of the
GNMA Certificates held by a Fund have a direct impact on the net asset value per
share of the Fund.
When interest rates rise, the value of a GNMA Certificate will generally
decline. Conversely, when rates fall, the GNMA Certificate value may rise,
although not as much as other debt issues, due to the prepayment feature. As a
result, the price per share the shareholder receives on redemption may be more
or less than the price paid for the shares. The dividends per share paid by the
Government Securities Fund may also vary.
ADDITIONAL INFORMATION ON FOREIGN SECURITIES. Each Fund, except
Government Securities Fund, may invest in securities of foreign issuers.
Each of these Funds other than High Total Return, High Yield and Strategic
Income may invest up to 20% of its net assets in foreign securities, of which
10% of its net assets may be invested in foreign securities that are not
listed on a U.S. securities exchange. High Total Return may invest up to 50%
of its assets in securities of foreign issuers, High Yield up to 35%,
and Strategic Income Fund may invest up to 60% of its total assets.
Eurodollar certificates of deposit are excluded for purposes of this
limitation for Strategic Income.
ADDITIONAL INFORMATION ON HIGH YIELD SECURITIES. Strategic Income Fund,
High Yield Fund, High Total Return Fund, and Income Fund each may invest in
lower-rated fixed income securities to the extent described in the
Prospectus. The lower ratings of certain securities held by these Funds
reflect a greater possibility that adverse changes in the financial condition
of the issuer or economic conditions in general, or
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both, or an unanticipated rise in interest rates, may impair the ability of the
issuer to make payments of interest and principal. The inability (or perceived
inability) of issuers to make timely payment of interest and principal would
likely make the values of securities held by these Funds more volatile and could
limit a Fund's ability to sell its securities at prices approximating the values
the Fund had placed on such securities. In the absence of a liquid trading
market for the securities held by it, a Fund may be unable at times to establish
the fair value of such securities. The rating assigned to a security by Moody's
Investors Service, Inc. or S & P (or by any other nationally recognized
securities rating organization) does not reflect an assessment of the volatility
of the security's market value or the liquidity of an investment in the
security. See the Appendix to the Prospectus for a description of security
ratings.
Like those of other fixed income securities, the values of lower-rated
securities fluctuate in response to changes in interest rates. Thus, a decrease
in interest rates will generally result in an increase in the value of a Fund's
assets. Conversely, during periods of rising interest rates, the value of a
Fund's assets will generally decline. In addition, the values of such
securities are also affected by changes in general economic conditions and
business conditions affecting the specific industries of their issuers. Changes
by recognized rating services in their ratings of any fixed income security and
in the ability of an issuer to make payments of interest and principal may also
affect the value of these investments. Changes in the value of portfolio
securities generally will not affect cash income derived from such securities,
but will effect a Fund's net asset value. A Fund will not necessarily dispose
of a security when its rating is reduced below its rating at the time of
purchase, although the Adviser will monitor the investment to determine whether
its retention will assist in meeting a Fund's investment objective.
Certain securities held by a Fund may permit the issuer at its option to
call, or redeem, its securities. If an issuer were to redeem securities held by
a Fund during a time of declining interest rates, the Fund may not be able to
reinvest the proceeds in securities providing the same investment return as the
securities redeemed.
LOAN PARTICIPATIONS AND ASSIGNMENTS. Each Fund may invest in loan
participations and loan assignments. A Fund's investment in loan
participations typically will result in the Fund having a contractual
relationship only with the Lender and not with the borrower. The Fund will
have the right to receive payments of principal, interest and any fees to
which it is entitled only from the Lender selling the Participations and only
upon receipt by the Lender of the payments from the borrower. In connection
with purchasing Participations, the Fund generally will have no right to
enforce compliance by the borrower with the terms of the loan agreement
relating to the Loan, nor any right of set-off against the borrower, and the
Fund may not directly benefit from any collateral supporting the Loan in which
it has purchased the Participation. As a result, the Fund may be subject to
the credit risk of both the borrower and the Lender that is selling the
Participation. In the event of the insolvency of the Lender selling a
Participation, the Fund may be treated as a general creditor of the Lender and
may not benefit from any set-off between the Lender and the
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<PAGE>
borrower.
When a Fund purchases a loan assignment from Lenders, it will acquire
direct rights against the borrowers on the Loan. Because Assignments are
arranged through private negotiations between potential assignees and
potential assignors, however, the rights and obligations acquired by the Fund
as the purchaser of an Assignment may differ from, and be more limited than,
those held by the assigning Lender. Because there is no liquid market for
such securities, the Funds anticipate that such securities could be sold
only to a limited number of institutional investors. The lack of a liquid
secondary market may have an adverse impact on the value of such securities
and a Fund's ability to dispose of particular assignments or participations
when necessary to meet redemptions of Fund shares, to meet the Fund's
liquidity needs or when necessary in response to a specific economic event,
such as deterioration in the creditworthiness of the borrower. The lack of a
liquid secondary market for assignments and participations also may make it
more difficult for a Fund to value these securities for purposes of
calculating its net asset value.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
The Adviser, and Subadviser in the case of Special Fund, places orders for
the purchase and sale of the Funds' securities, supervises their execution and
negotiates brokerage commissions on behalf of each Fund. For purposes of the
remainder of this section, "Portfolio Transactions and Brokerage Allocation,"
discussion of the Adviser includes the Subadviser, but only with respect to
Special Fund. It is the practice of the Adviser to seek the best prices and
best execution of orders and to negotiate brokerage commissions that in the
Adviser's opinion, are reasonable in relation to the value of the brokerage
services provided by the executing broker. Brokers who have executed orders for
the Funds are asked to quote a fair commission for their services. If the
execution is satisfactory and if the requested rate approximates rates currently
being quoted by the other brokers selected by the Adviser, the rate is deemed by
the Adviser to be reasonable. Brokers may ask for higher rates of commission if
all or a portion of the securities involved in the transaction are positioned by
the broker, if the broker believes it has brought a Fund an unusually favorable
trading opportunity, or if the broker regards its research services as being of
exceptional value and payment of such commissions is authorized by the Adviser
after the transaction has been consummated. If the Adviser more than
occasionally differs with the broker's appraisal of opportunity or value, the
broker would not be selected to execute trades in the future. The Adviser
believes that each Fund benefits with a securities industry comprised of many
and diverse firms and that the long-term interest of shareholders of the Funds
is best served by its brokerage policies that include paying a fair commission,
rather than seeking to exploit its leverage to force the lowest possible
commission rate. The primary factors considered in determining the firms to
which brokerage orders are given are the Adviser's appraisal of the firm's
ability to execute the order in the desired manner, the value of research
services provided by the firm, and the firm's attitude toward and interest in
mutual funds
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<PAGE>
in general, including the sale of mutual funds managed and sponsored by the
Adviser. The Adviser does not offer or promise to any broker an amount or
percentage of brokerage commissions as an inducement or reward for the sale of
shares of the Funds. Over-the-counter purchases and sales are transacted
directly with principal market-makers, except in those circumstances where, in
the opinion of the Adviser, better prices and execution are available elsewhere.
In general terms, the nature of research services provided by brokers
encompasses statistical and background information, and forecasts and
interpretations with respect to U.S. and foreign economies, U.S. and foreign
money markets, fixed income markets and equity markets, specific industry groups
and individual issues. Research services will vary from firm to firm, with
broadest coverage generally from the large full-line firms. Smaller firms, in
general, tend to provide information and interpretations on a smaller scale,
frequently with a regional emphasis. In addition, several firms monitor
federal, state, local and foreign political developments; many of the brokers
also provide access to outside consultants. The outside research assistance is
particularly useful to the Adviser's staff, since the brokers, as a group, tend
to monitor a broader universe of securities and other matters than the Adviser's
staff can follow. In addition, the outside research provides the Adviser with a
diverse perspective on financial markets. Research and investment information
is provided by these and other brokers at no cost to the Adviser and is
available for the benefit of other accounts advised by the Adviser and its
affiliates; and not all of this information will be used in connection with the
Funds. While this information may be useful in varying degrees and may tend to
reduce the Adviser's expenses, it is not possible to estimate its value, and, in
the opinion of the Adviser, it
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<PAGE>
does not reduce the Adviser's expenses by a determinable amount. The extent to
which the Adviser makes use of statistical, research and other services
furnished by brokers is considered by the Adviser in the allocation of brokerage
business, but there is no formula by which such business is allocated. The
Adviser does so in accordance with its judgment of the best interests of the
Funds and their shareholders.
Purchases and sales of fixed income securities will usually be principal
transactions. Such securities often will be purchased or sold from or to
dealers serving as market makers for the securities at a net price. Each Fund
will also purchase such securities in underwritten offerings and will, on
occasion, purchase securities directly from the issuer. Generally, fixed income
securities are traded on a net basis and do not involve brokerage commissions.
The cost of executing fixed income securities transactions consists primarily of
dealer spreads and underwriting commissions.
In purchasing and selling fixed income securities, it is the policy of each
Fund to obtain the best results, while taking into account the dealer's general
execution and operational facilities, the type of transaction involved and other
factors, such as the dealer's risk in positioning the securities involved.
While the Adviser generally seeks reasonably competitive spreads or commissions,
the Funds will not necessarily pay the lowest spread or commission available.
Each Fund may, under circumstances in which two or more dealers are in a
position to offer comparable results, give preference to a dealer that has
provided statistical or other research services to the Funds. By allocating
transactions in this manner, the Adviser is able to supplement its research and
analysis with the views and information of other securities firms. During the
fiscal years ended October 31, 1995 and December 31, 1995, respectively, each of
the Funds listed below paid the total brokerage commissions indicated below,
including, in the case of the Government, High Yield, Income, Growth, Special
and Strategic Income Funds, commissions to Advest, Inc. ("Advest"), an affiliate
of the Funds' former investment adviser.
BROKERAGE COMMISSIONS PAID DURING MOST RECENT
FISCAL YEARS
October 31, 1995 1994
---- ----
Income and Growth Fund $249,474 136,000
High Total Return Fund $0 3,021
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<PAGE>
BROKERAGE COMMISSIONS
PAID DURING MOST RECENT FISCAL YEARS
Fund December 31, 1995 1994
- ---- ---- ----
Government Fund $ 0 $ 0
------- --------
High Yield Fund $ 12,763 $ 13,184
------- --------
Income Fund $ 88,151 $ 97,750
------- --------
Growth Fund $241,864 $151,132
------- --------
Special Fund $ 87,375 $ 47,281
------- --------
Strategic Income Fund $ 552 $ 0
------- --------
A change in securities held in the portfolio of a Fund is known as
"Portfolio Turnover" and may involve the payment by a Fund of dealer mark-ups
or brokerage or underwriting commissions and other transaction costs on the
sale of securities, as well as on the reinvestment of the proceeds in other
securities. Portfolio turnover rate for a fiscal year is the percentage
determined by dividing the lesser of the cost of purchases or proceeds from
sales of portfolio securities by the average of the value of portfolio
securities during such year, all excluding securities whose maturities at
acquisition were one year or less. Each Fund cannot accurately predict its
portfolio turnover rate, but the Adviser anticipates that each Fund's rate
will not exceed 100% under normal market conditions. A 100% annual turnover
rate would occur, for example, if all the securities in the portfolio were
replaced once in a period of one year. A Fund's portfolio turnover rate may
be higher than that described above if a Fund finds it necessary to
significantly change its portfolio to adopt a temporary defensive position or
respond to economic or market events. A high turnover rate would increase
commission expenses and may involve realization of gains that would be taxable
to shareholders. The ability of a Fund to make purchases and sales of
securities and to engage in options and futures transactions will be limited by
certain requirements of the Code, including a requirement that less than 30% of
the Fund's annual gross income be derived from gains on the sale of securities
and certain other assets held for less than three months.
SERVICES OF THE ADVISER AND ADMINISTRATOR
Pursuant to an Investment Advisory Agreement with each Fund, Northstar
Investment Management Corporation acts as the investment adviser to each
Fund. In this capacity, the Adviser, subject to the authority of the Trustees
of the Funds, and subject to delegation of certain responsibilities to the
Subadviser for the Special Fund, is responsible for furnishing continuous
investment supervision to the Funds and is responsible for the management of
each Fund's portfolio.
The Adviser is an indirect, majority-owned subsidiary of ReliaStar
Financial Corp. ("ReliaStar"). Combined minority interests in the Adviser
held by members of senior management of ReliaStar currently equal 20%.
ReliaStar is a publicly traded holding company whose subsidiaries specialize
in the life insurance business. Through Northwestern National Life Insurance
Company ("Northwestern") and other subsidiaries, ReliaStar issues and
distributes individual life insurance and annuities, group life and health
insurance and life and health reinsurance, and provides related investment
management services. The address of the Adviser is Two Pickwick Plaza,
Greenwich, Connecticut 06830. The address of ReliaStar is 20 Washington
Avenue South, Minneapolis, Minnesota 55401.
The Adviser charges a fee under each advisory agreement to Government
Securities Fund, High Yield Fund, Income Fund, Growth Fund, Special Fund and
Strategic Income Fund at an annual rate, after voluntary waivers or expense
reimbursements, of 0.45%, 0.45%, 0.65%, 0.75%, 0.75% and 0.65% of such Fund's
average daily net assets, respectively. This fee is accrued daily and payable
monthly.
The Adviser charges a fee to the High Total Return Fund and Income and
Growth Fund at the annual rate of 0.75% on the first $250,000,000 of aggregate
average daily net assets of each Fund, 0.70% on the next $250,000,000 of such
assets, 0.65% on the next $250,000,000 of such assets; 0.60% on the next
$250,000,000 of such assets, and
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<PAGE>
0.55% on the remaining aggregate daily net assets of each Fund in excess of $1
billion.
The Adviser has agreed that if, in any fiscal year, the aggregate expenses
of a Fund, exclusive of taxes, distribution fees, brokerage, interest and (with
the prior consent of any necessary state securities commissions) extraordinary
expenses, but including the management fee, exceed the most restrictive expense
limitations applicable to the Fund under state securities laws or published
regulations thereunder, the Adviser will refund on a proportionate basis to the
Fund whose expenses exceeded such limitation the excess over such amount up to
the total fee received by the Adviser. Currently, the most restrictive of such
limitations would require the Adviser to reimburse such a Fund to the extent
that in any fiscal year such aggregate expenses exceed 2.5% of the first
$30,000,000 of the average net assets, 2.0% of the next $70,000,000 of the
average net assets and 1.5% of any amount of the average net assets in excess of
$100,000,000.
The Investment Advisory Agreement for the Income and Growth Fund and
High Total Return Fund was approved by the Trustees of the Northstar
Advantage Trust on October 23, 1993, and by the sole Shareholder of the
Northstar Income and Growth Fund, and High Total Return Fund on November 8,
1993. The Investment Advisory Agreement continued in effect for a period of
two years and was renewed by the Trustees for one year on October 31, 1995.
It will continue in effect from year to year if specifically approved
annually by (a) the Trustees, acting separately on behalf of each Fund,
including a majority of the Disinterested Trustees, or (b) a majority of the
outstanding voting securities of each class of each Fund as defined in the
1940 Act.
Each Investment Advisory Agreement for the remaining Funds was approved by
the Trustees of the affected Fund on March 1, 1995 and by the shareholders of
such Fund on June 2, 1995. Each such Investment Advisory Agreement will
continue in effect until June 2, 1997, and thereafter, will continue in effect
from year to year if specifically approved annually by (a) the Trustees, acting
separately on behalf of the particular Fund, including a majority of the
Disinterested Trustees, or (b) a majority of the outstanding voting securities
of each class of such Fund as defined in the 1940 Act.
A Fund's Investment Advisory Agreement may be terminated as to any class,
without penalty and at any time, by a similar vote upon not more than 60 days'
nor less than 30 days' written notice by the Adviser, the Trustees, or a
majority of the outstanding voting securities of such class of such Fund as
defined in the 1940 Act. Such agreement will automatically terminate in the
event of its assignment, as defined in Section 2(a)(4) of the 1940 Act.
Pursuant to a Subadvisory Agreement between the Adviser and the
Subadviser, effective February 1, 1996, Navellier acts as subadviser to
Special Fund. In this capacity, Navellier Fund Management, Inc.,
subject to the supervision and control of the Adviser and the Trustees of
Special Fund, will manage Special Fund's portfolio investments, consistently
with such
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<PAGE>
Fund's investment objective, and will execute any of Special Fund's
investment policies that it deems appropriate to utilize from time to time.
Fees payable under the Subadvisory Agreement will accrue daily and be paid
monthly by the Adviser. As compensation for its services, the Adviser will
pay the Subadviser at the annual rate of 0.48 of 1% of the average daily net
assets of Special Fund. The Subadviser is wholly-owned and controlled by its
sole stockholder, Louis G. Navellier. The Subadviser's address is: Call Box
10012, Incline Village, Nevada 89450-1012. The Subadvisory Agreement was
approved by the Trustees of the Fund on December 1, 1995, and by vote of the
Shareholders of the Fund on January 30, 1996. The Subadvisory Agreement may
be terminated without payment of any penalty by the Adviser, the Subadviser,
the Trustees of such Fund, or the shareholders of such Fund on
not more than 60 days' and not less than 30 days' prior written notice.
Otherwise, the Subadvisory Agreement will remain in effect for two years and
will, thereafter, continue in effect from year to year, subject to the annual
approval of the Trustees of Special Fund, or the vote of a majority of the
outstanding voting securities of Special Fund, and the vote, cast in person
at a meeting duly called and held, of a majority of the Trustees of Special
Fund who are not parties to the Subadvisory Agreement or "interested persons"
(as defined in the 1940 Act) of any such Party.
Northstar Administrators Corporation serves as administrator for the Funds,
pursuant to an Administrative Services Agreement with each Fund. Subject to the
supervision of the Board of Trustees, the Administrator provides the overall
business management and administrative services necessary to the proper conduct
of the Funds' business, except for those services performed by the Adviser under
the Investment Advisory Agreements, the custodian for the Funds under the
Custodian Agreements, the transfer agent for the Funds under the Transfer Agency
Agreements, and such other service providers as may be retained by the Funds
from time to time. The Administrator acts as liaison among these service
providers to the Funds. The Administrator is also responsible for ensuring that
the Funds operate in compliance with applicable legal requirements and for
monitoring the Adviser for compliance with requirements under applicable law and
with the investment policies and restrictions of the Funds. The Administrator
is an affiliate of the Adviser. The address of the Administrator is: Two
Pickwick Plaza, Greenwich, Connecticut 06830.
The Administrative Services Agreement was approved by the Trustees of
the Trust on behalf of the Income and Growth Fund and High Total Return Fund
on October 23, 1993, and continued in effect for a period of two years. The
Agreement was renewed by the Trustees for one year on October 31, 1995 and
will continue in effect from year to year thereafter, provided such
continuance is approved annually by a majority of the Trustees of the Trust.
The Administrator's fee is accrued daily against the value of each Fund's net
assets and is payable by each Fund monthly at an annual rate of .10% of each
Fund's average daily net assets. In addition, the Administrator charges an
annual account fee of $5.00 for each account of beneficial owners of shares
in a Fund for providing certain shareholder services and assisting
broker-dealer shareholder accounts.
Each Administrative Services Agreement for the remaining Funds was approved
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<PAGE>
by the Trustees of the particular Fund on March 1, 1995. The Agreements provide
that until June 2, 1997, the Administrator will not receive any compensation
under such agreements and thereafter shall receive such compensation as the
Board of Trustees of the Funds may determine. The Agreements will continue in
effect until June 2, 1997, and from year to year thereafter, provided such
continuance is approved annually by a majority of the Disinterested Trustees of
the affected Fund.
During the fiscal years ended October 31, 1995 and 1994, the Funds listed
below paid the Adviser and Administrator the following investment advisory and
administrative fees, respectively:
TOTAL ADVISORY AND ADMINISTRATIVE FEES PAID
DURING FISCAL YEAR ENDED OCTOBER 31,
<TABLE>
<CAPTION>
1995 1994
---- ----
Advisory Fees Administrative Fees Advisory Fees Administrative Fees
<S> <C> <C> <C> <C>
Income and Growth Fund $1,158,432 $154,457 $509,440(1) $64,452
High Total Return Fund $941,310 $125,508 $382,777(2) $49,816
</TABLE>
(1) Does not reflect expense reimbursement of $57,594.
(2) Does not reflect expense reimbursement of $72,201.
Prior to June 5, 1995, the Government Securities, Strategic Income, High
Yield, Income, Growth and Special Funds were managed by Boston Security
Counsellors, Inc. ("BSC") and did not utilize the services of an administrator.
During the fiscal years ended December 31, 1995, 1994 and 1993, the Funds listed
below paid Northstar or BSC the following investment advisory fees:
TOTAL ADVISORY FEES PAID
DURING YEAR ENDED DECEMBER 31,
Fund 1995 1994 1993
Government Fund (1) 678,996 $747,846 $767,370
High Yield Fund 683,323 $622,761 $432,063
Income Fund 477,095 $519,729 $447,631
Growth Fund 593,282 $604,576 $517,203
Special Fund 287,311(2) $268,139 $145,178
Strategic Income Fund(3) 252,201 $57,726 --
(1) Net of waiver of investment advisory fees of $301,776, $332,370 and
$341,054 for the years ended December 31, 1995, 1994 and 1993,
respectively.
(2) Does not reflect expense reimbursement of $733.
(3) Does not reflect expense reimbursement of $57,336 in 1994, and $87,944
for the year ended December 31, 1995.
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<PAGE>
NET ASSET VALUE
For each Fund in the Northstar Advantage Trust, equity securities are
valued at the last sale price on the exchange or in the principal OTC market in
which such securities are being valued, or lacking any sales, at the last
available bid price. Prices of long-term debt securities are valued on the
basis of last reported sales price, or if no sales are reported, the value is
determined based upon the mean of representative quoted bid or asked prices for
such securities obtained from a quotation reporting system or from established
market makers, or at prices for securities of comparable maturity, quality and
type. For the Northstar Advantage Special, Growth, Income, High Yield,
Strategic Income, and Government Securities Funds, portfolio securities, options
and futures contracts and options thereon that are traded on national exchanges
or in the NASDAQ System are valued at the last sale or settlement price on the
exchange or market where primarily traded or, if none that day, at the mean of
the last reported bid and asked prices, using prices as of the close of trading
on the applicable exchange or market. Securities and options that are traded in
the OTC market (other than on the NASDAQ System) are valued at the mean of the
last available bid and asked prices. Such valuations are based on quotations of
one or more dealers that make markets in the securities as obtained from such
dealers or from a pricing service. Securities (including OTC options) for which
market quotations are not readily available (which may constitute a major
portion of the High Yield Fund's portfolio) and other assets are valued at their
fair value as determined by or under the direction of the Trustees. Such fair
value may be determined by various methods, including utilizing information
furnished by pricing services that determine calculations for such securities
using methods based, among other things, upon market transactions for comparable
securities and various relationships between securities that are generally
recognized as relevant.
The net asset value of each Fund's shares fluctuates and is determined
separately for each class as of the close of regular trading on the New York
Stock Exchange (currently 4:00 p.m. EST), on each business day that the Exchange
is open. Net asset value per share is computed by determining the value of a
Fund's assets (securities held plus cash and other assets, including dividend
and interest accrued but not received) less all liabilities of the Fund
(including accrued expenses other than class specific expenses), and dividing
the result by the total number of shares outstanding at such time. The specific
expenses borne by each class of shares will be deducted from that class and will
38
<PAGE>
result in different net asset values and dividends. The net asset value per
share of the Class B, Class C and Class T shares of each Fund will generally
be lower than that of the Class A shares because of the higher class-specific
expenses borne by each of the Class B, Class C and Class T shares. Under
normal market conditions, daily prices for securities are obtained from
independent pricing services, determined by them in accordance with the
registration statement for each Fund. Securities are valued at market value
or, if a market quotation is not readily available, at their fair value,
determined in good faith under procedures established by and under the
supervision of the Trustees. Money market instruments maturing within 60
days are valued using the amortized cost method of valuation. This involves
valuing a security at cost on the date of acquisition and thereafter assuming
a constant accretion of a discount or amortization of a premium to maturity,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. While this method provides certainty in valuation, it may
result in periods during which value, as determined by amortized cost, is
higher or lower than the price a Fund would receive if it sold the
instrument. See "How Net Asset Value is Determined" in the Prospectus.
PURCHASES AND REDEMPTIONS
Shares issued pursuant to the automatic reinvestment of income dividends
or capital gains distributions are not subject to a front-end or contingent
deferred sales load. There is no sales charge for qualified persons.
"Qualified Persons" are the following (a) active or retired Trustees,
Directors, Officers, Partners or Employees (including immediate family) of
(i) the Adviser or any of its affiliated companies, (ii) the Funds or any
Northstar affiliated investment company or (iii) dealers having a sales
agreement with the Underwriter, (b) trustees or custodians of any qualified
retirement plan or IRA established for the benefit of a person in (a) above;
(c) dealers, brokers or registered investment advisers that have entered into
an agreement with the Underwriter providing for the use of shares of the
Funds in particular investment products such as "wrap accounts" or other
similar managed accounts for the benefit of the clients of such brokers,
dealers and registered investment advisers, and (d) pension, profit sharing
or other benefit plans created pursuant to a plan qualified under Section 401
of the Code or plans under Section 457 of the Code, provided that such shares
are purchased by an employer sponsored plan with at least 100 eligible
employees. Class A shares of the Funds may be purchased at net asset value,
through a dealer, where the amount invested represents redemption proceeds
from another open-end fund with the same or similar investment objective, and
PROVIDED the following conditions are met: such redemption occurred no more
than 60 days prior to the purchase of shares of a Northstar Fund, the
redeemed shares were held for at least six months prior to redemption, and
the proceeds of the redemption are sent directly to Northstar or its agent,
or maintained in cash or a money market fund. No commissions will be paid to
dealers in connection with such purchases. There is also no initial sales
charge for "Purchasers" (defined below) if the initial amount invested in the
Funds) is at least $1,000,000 or the Purchaser signs a $1,000,000 Letter of
Intent, as hereinafter defined.
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<PAGE>
HOW TO OBTAIN REDUCED SALES CHARGES ON CLASS A SHARES
Investors choosing the initial sales alternative may under certain
circumstances be entitled to pay reduced sales charges. The sales charge varies
with the size of the purchase and reduced charges apply to the aggregate of
purchases of a Fund made at one time by any "Purchaser," which term includes (i)
an individual and his/her spouse and their children under the age of 21, (ii) a
trustee or fiduciary purchasing for a single trust, estate or single fiduciary
account (including IRAs, pension, profit-sharing or other employee benefit
trusts created pursuant to a plan qualified under Section 401 of the Code, a
Simplified Employee Pension ("SEP"), Salary Reduction and other Elective
Simplified Employee Pension Accounts ("SARSEP")) and 403(b) and 457 plans,
although more than one beneficiary or participant is involved; and (iii) any
other organized group of persons, whether incorporated or not, provided the
organization has been in existence for at least six months and has some purpose
other than the purchase at a discount of redeemable securities of a registered
investment company. The circumstances under which "Purchasers" may pay reduced
sales charges are described in the Prospectus.
40
<PAGE>
THE RIGHT OF REDEMPTION
The right to redeem shares may be suspended and payment therefor postponed
during periods when the New York Stock Exchange is closed, other than customary
weekend and holiday closings, or, if permitted by rules of the SEC, during
periods when trading on the Exchange is restricted, or during any emergency that
makes it impracticable for any Fund to dispose of its securities or to determine
fairly the value of its net assets or during any other period permitted by order
of the SEC for the protection of investors. Furthermore, the Transfer Agent
will not mail redemption proceeds until checks received for shares purchased
have cleared, but payment will be forwarded immediately upon the funds becoming
available. Class B, Class C and Class T shareholders will be subject to the
applicable deferred sales charge, if any, for their shares at the time of
redemption.
The contingent deferred sales load will be waived with respect to Class T
shares in the following instances: (i) any partial or complete redemption of
shares of a shareholder who dies or becomes disabled, so long as the redemption
is requested within one year of death or the initial determination of
disability; (ii) any partial or complete redemption in connection with
distributions under Individual Retirement Accounts ("IRAs") or other qualified
retirement plans in connection with a lump-sum or other form of distribution
following retirement within the meaning of Section 72(t)(2)(A)(iv) or (v) of the
Code, disability or death, or after attaining the age of 59 1/2 in the case of
an IRA, Keogh Plan or custodial account pursuant to Section 403(b)(7) of the
Code, or on any redemption that results from a tax-free return of an excess
contribution pursuant to Section 408(d)(4) or (5) of the Code or Section 4979(f)
of the Code; (iii) redemptions effected pursuant to the Funds' right to
liquidate a shareholder's account if the aggregate net asset value of the shares
held in the account is less than $500; (iv) redemptions effected by (A)
employees of The Advest Group, Inc. ("AGI") and its subsidiaries, (B) IRAs,
Keogh plans and employee benefit plans for those employees, and (C) spouses and
41
<PAGE>
minor children of those employees, so long as orders for shares are placed on
behalf of the spouses or children by the employees; (v) redemptions effected by
accounts managed by investment advisory subsidiaries of AGI registered under the
Investment Advisers Act of 1940; and (vi) redemptions in connection with
exchanges of Fund Class T shares, including shares of the Class T account of the
Money Market Portfolio.
EXCHANGES
The following conditions must be met for all exchanges among the Funds and
the Money Market Portfolio: (1) the shares that will be acquired in the exchange
(the "Acquired Shares") are available for sale in the shareholder's state of
residence; (2) the Acquired shares will be registered to the same shareholder
account as the shares to be surrendered (the "Exchanged Shares"); (3) the
Exchanged Shares must have been held in the shareholder's account for at least
30 days prior to the exchange; (4) except for exchanges into the Money Market
Portfolios, the account value of the Fund whose shares are to be acquired must
equal or exceed the minimum initial investment amount required by that Fund
after the exchange is implemented; and (5) a properly executed exchange request
has been received by the Transfer Agent.
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<PAGE>
Each Fund reserves the right to delay the actual purchase of the Acquired
Shares for up to five business days if it determines that it would be
disadvantaged by an immediate transfer of proceeds from the redemption of
Exchanged Shares. Normally, however, the redemption of Exchanged Shares and the
purchase of Acquired Shares will take place on the day that the exchange request
is received in proper form. Each Fund reserves the right to terminate or
modify its exchange privileges at any time upon prominent notice to
shareholders. Such notice will be given at least 60 days in advance. It is
the policy of the Adviser to discourage and prevent frequent trading by
shareholders among the Funds in response to market fluctuations.
Accordingly, in order to maintain a stable asset base in each Fund and to
reduce administrative expenses borne by each Fund, the Adviser generally
restricts shareholders to a maximum of six exchanges out of a Fund each
calendar year. If a shareholder exceeds this limit, future exchange requests
may be denied.
CONVERSION FEATURE
Class B shares of each Fund will automatically convert to Class A shares
without a sales charge at the relative net asset values of each of the classes
after eight years from the acquisition of the Class B shares, and as a result,
will thereafter be subject to the lower distribution fee (but same service
fee) under the Class A Rule 12b-1 plan for each Fund. Class T Shares convert
to Class A shares at the end of the month that is the later of (i) eight years
after the Class T Shares were purchased or (ii) May 31, 1998.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code. In order to so qualify, the Fund must, among
other things, (i) derive each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to certain securities loans, gains
from the sale of securities or foreign currencies, or other income (including
but not limited to gains from options, futures or forward contracts) derived
with respect to its business of investing in stock, securities or currencies;
(ii) derive less than 30% of its gross income each taxable year from the sale or
other disposition of certain assets, including securities, held for less than
three months (the "30% Limitation"; and (iii) at the end of each quarter of the
taxable year maintain at least 50% of the value of its total assets in cash,
government securities, securities of other regulated investment companies, and
other securities of issuers that represent, with respect to each issuer, no more
than 5% the value of the Fund's total assets and 10% of the outstanding voting
securities of such issuer, and with no more than 25% of its assets invested in
the securities (other than those of the U.S. Government or other regulated
investment companies) of any one issuer or of two or more issuers that the Fund
controls and that are engaged in the same, similar or related trades and
businesses. As a regulated investment company, each Fund generally will not be
subject to federal income tax on its income and gains that it distributes to
shareholders, if at
43
<PAGE>
least 90% of its investment company taxable income (which includes dividends,
interest and the excess of any short-term capital gains over long-term capital
losses) for the taxable year is distributed.
An excise tax at the rate of 4% will be imposed on the excess, if any, of a
Fund's "required distribution" over actual distributions in any calendar year.
Generally, the "required distribution" is 98% of a Fund's ordinary income for
the calendar year plus 98% of its capital gain net income recognized during the
one-year period ending on October 31 plus undistributed amounts from prior
years. Each Fund intends to make distributions sufficient to avoid imposition
of the excise tax. A distribution will be treated as paid on December 31 of the
current calendar year if it is declared by the Fund during October, November or
December of the year with a record date in such a month and paid by the Fund
during January of the following year. Such distributions will be taxable as if
received on December 31 in the year they are declared by the Fund, rather than
the year in which they are received.
The taxation of equity options and OTC options on debt securities is
governed by Code section 1234. Pursuant to Code section 1234, the premium
received by a Fund for selling a put or call option is not included in income at
the time of receipt. If the option expires, the premium is short-term capital
gain to the Fund. If the Fund enters into a closing transaction, the difference
between the amount paid to close out its position and the premium received is
short-term capital gain or loss. If a call option written by a Fund is
exercised, thereby requiring the Fund to sell the underlying security, the
premium will increase the amount realized upon the sale of such security and any
resulting gain or loss will be a capital gain or loss, and will be long-term or
short-term depending upon the holding period of the security. With respect to a
put or call option that is purchased by a Fund, if the option is sold, any
resulting gain or loss will be a capital gain or loss, and will be long-term or
short-term, depending upon the holding period of the option. If the option
expires, the resulting loss is a capital loss and is long-term or short-term,
depending upon the holding period of the option. If the option is exercised,
the cost of the option, in the case of a call option, is added to the basis of
the purchased security and, in the case of a put option, reduces the amount
realized on the underlying security in determining gain or loss.
Certain options, futures contracts and forward contracts in which a Fund
may invest are "section 1256 contracts." Gains or losses on section 1256
contracts are generally considered 60% long-term and 40% short-term capital
gains or losses ("60/40 gains or losses"); however, foreign currency gains or
losses (as discussed below) arising from certain section 1256 contracts may be
treated as ordinary income or loss. Also, section 1256 contracts held by a Fund
at the end of each taxable year (and, generally, for purposes of the 4% excise
tax, on October 31 of each year) are treated as sold on such date at fair market
value, resulting in unrealized gains or losses being treated as though they were
realized.
44
<PAGE>
Hedging transactions undertaken by a Fund may result in straddles for U.S.
federal income tax purposes. The straddle rules may accelerate income to a
Fund, defer losses to a Fund, and affect the character of gains (or losses)
realized by a Fund. Hedging transactions may increase the amount of short-term
capital gain realized by a Fund that is taxed as ordinary income when
distributed to shareholders. A Fund may make one or more of the various
elections available under the Code with respect to hedging transactions. If a
Fund makes any of the elections, the amount, character and timing of the
recognition of gains or losses from the affected positions will be determined
under rules that vary according to the elections made. The 30% limitation may
limit the extent to which a Fund will be able to engage in transactions in
options, futures contracts and forward contracts.
Under the Code, gains or losses attributable to fluctuations in exchange
rates that occur between the time a Fund accrues interest or other receivables,
or accrues expenses or other liabilities, denominated in a foreign currency and
the time the Fund actually collects such receivables, or pays such liabilities,
generally are treated as ordinary income or ordinary loss. Similarly, on
disposition of debt securities denominated in a foreign currency and certain
options, futures and forward contracts, gains or losses attributable to
fluctuations in the value of foreign currency between the date of acquisition of
the security or contract and the date of disposition also are treated as
ordinary gain or loss. These gains or losses, referred to under the Code as
"section 988" gains or losses, may increase or decrease the amount of a Fund's
investment company taxable income to be distributed to its shareholders as
ordinary income.
A Fund will not realize gain or loss on a short sale of a security until it
closes the transaction by delivering the borrowed security to the lender. All
or a portion of any gain arising from a short sale may be treated as short-term
capital gain, regardless of the period for which the Fund held the security used
to close the short sale. In addition, the Fund's holding period for any
security that is substantially identical to that which is sold short may be
reduced or eliminated as a result of the short sale.
Investments by a Fund in zero coupon securities will result in income to
the Fund equal to a portion of the excess of the face value of the securities
over their issue price (the "original issue discount") each year that the
securities are held, even though the Fund receives no cash interest payments.
This income is included in determining the amount of income that the Fund must
distribute to maintain its status as a regulated investment company and to avoid
the payment of federal income tax and the 4% excise tax. If a Fund invests in
certain high yield original issue discount obligations issued by corporations, a
portion of the original issue discount accruing on the obligations may be
eligible for the deduction for dividends received by corporations. In such
event, a portion of the dividends of investment company taxable income received
from the Fund by its corporate shareholders may be eligible for this deduction.
45
<PAGE>
Gain derived by a Fund from the disposition of any market discount bonds
(i.e., bonds purchased other than at original issue, where the face value of the
bonds exceeds their purchase price) held by the Fund will be taxed as ordinary
income to the extent of the accrued market discount on the bonds, unless the
Fund elects to include the market discount in income as it accrues.
If a Fund invests in stock of certain foreign corporations that generate
largely passive investment-type income, or which hold a significant percentage
of assets that generate such income (referred to as "passive foreign investment
companies" or "PFICs"), these investments would be subject to special tax rules
designed to prevent deferral of U.S. taxation of the Fund's share of the PFIC's
earnings. In the absence of certain elections to report these earnings on a
current basis, regardless of whether the Fund actually receives any
distributions from the PFIC, investors in the Fund would be required to report
certain "excess distributions" from, and any gain from the disposition of stock
of, the PFIC as ordinary income. This ordinary income would be allocated
ratably to the Fund's holding period for the stock. Any amounts allocated to
prior years would be taxable at the highest rate of tax applicable in that year,
increased by an interest charge determined as though the amounts were
underpayments of tax.
Income received by the Funds from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. If more than
50% of the value of a Fund's total assets at the close of its taxable year
consists of securities of foreign corporations, the Fund will be eligible and
may elect to "pass through" to the Fund's shareholders the amount of foreign
taxes paid by the Fund. Pursuant to this election, a shareholder will be
required to include in gross income (in addition to dividends actually received)
its pro rata share of the foreign taxes paid by the Fund, and may be entitled
either to deduct its pro rata share of the foreign taxes in computing its
taxable income or to use the amount as a foreign tax credit against its U.S.
federal income tax liability, subject to limitations. Each shareholder will be
notified within 60 days after the close of the Fund's taxable year whether the
foreign taxes paid by the Fund will "pass through" for that year. If a Fund is
not eligible to make the election to "pass through" to its shareholders its
foreign taxes, the foreign taxes it pays will reduce its investment company
taxable income and distributions by the Fund will be treated as U.S. source
income.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to its foreign source
taxable income. For this purpose, if the pass-through election is made, the
source of the Fund's income flows through to its shareholders. With respect to
the Funds, gains from the sale of securities will be treated as derived from
U.S. sources and certain currency fluctuation gains, including fluctuation gains
from foreign currency denominated debt securities, receivables and payables, and
options, futures and forward transactions, will be treated as ordinary income
derived from U.S. sources. The limitation on the foreign tax credit is applied
separately to foreign source passive income (as defined for purposes of the
foreign tax
46
<PAGE>
credit), including the foreign source passive income passed through by the
Funds.
The current position of the Internal Revenue Service (the "IRS") generally
is to treat a regulated investment company, such as the Special Fund, as owning
its proportionate share of the income and assets of any partnership in which it
is a partner, in applying the 90% qualifying income requirement, the 30%
Limitation and the asset diversification requirements that, as described above,
each Fund must satisfy to qualify as a regulated investment company under the
Code. These requirements may limit the extent to which the Special Fund may
invest in limited partnerships, especially in the case of limited partnerships
that do not primarily invest in a diversified portfolio of stocks and
securities.
Dividends paid out of a Fund's investment company taxable income will be
taxable to a U.S. shareholder as ordinary income. If a portion of a Fund's
income consists of dividends paid by U.S. corporations, a portion of the
dividends paid by the Fund may be eligible for the corporate dividends-received
deduction. Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses), if any, designated as capital
gain dividends are taxable as long-term capital gains, regardless of how long
the shareholder has held the Fund's shares, and are not eligible for the
dividends-received deduction. Shareholders receiving distributions in the form
of additional shares, rather than cash, generally will have a cost basis in each
such share equal to the net asset value of a share of the relevant Fund on the
reinvestment date. A distribution of an amount in excess of a Fund's current
and accumulated earnings and profits will be treated by a shareholder as a
return of capital that is applied against and reduces the shareholder's basis in
his or her shares. To the extent that the amount of any such distribution
exceeds the shareholder's basis in his or her shares, the excess will be treated
by the shareholder as gain from a sale or exchange of the shares. Shareholders
will be notified annually as to the U.S. federal tax status of distributions,
and shareholders receiving distributions in the form of additional shares will
receive a report as to the net asset value of those shares.
Upon the sale or other disposition of shares of a Fund, a shareholder may
realize a capital gain or loss that will be long-term or short-term, generally
depending upon the shareholder's holding period for the shares. Any loss
realized on a sale or exchange will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30 days before and
ending 30 days after disposition of the shares. In such a case, the basis of
the shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a shareholder on a disposition of Fund shares held by the
shareholder for six months or less will be treated as a long-term capital loss
to the extent of any distributions of net capital gains received by the
shareholder with respect to such shares.
Under certain circumstances, the sales charge incurred in acquiring shares
of a Fund may not be taken into account in determining the gain or loss on the
disposition of those shares. This rule applies where shares of a Fund originally
acquired with a sales
47
<PAGE>
charge are disposed of within 90 days after the date on which they were acquired
and new shares of a regulated investment company are acquired without a sales
charge or at a reduced sales charge. In that case, the gain or loss realized on
the disposition will be determined by excluding from the tax basis of the shares
all or a portion of the sales charge incurred in acquiring those shares. This
exclusion applies to the extent that the otherwise applicable sales charge with
respect to the newly acquired shares is reduced as a result of the shareholder
having incurred a sales charge paid for the new shares. This rule may be
applied to successive acquisitions of shares of stock.
Distributions by a Fund reduce the net asset value of that particular
Fund's shares. Should a distribution reduce the net asset value of a share
below a shareholder's cost for the share, such a distribution nevertheless
generally would be taxable to the shareholder as ordinary income or long-term
capital gain, even though, from an investment standpoint, it may constitute a
partial return of capital. In particular, investors should be careful to
consider the tax implications of buying shares just prior to a distribution by a
Fund. The price of shares purchased at that time may include the amount of the
forthcoming distribution, but the distribution generally would be taxable to
them.
Some shareholders may be subject to withholding of Federal income tax on
dividends and redemption payments from a Fund ("backup withholding") at the rate
of 31%. Corporate shareholders and certain other shareholders specified in the
Code generally are exempt from such backup withholding. Generally, shareholders
subject to backup withholding will be (i) those for whom a certified taxpayer
identification number is not on file with a Fund, (ii) those about whom
notification has been received (either by the shareholder or by a Fund) from the
IRS that they are subject to backup withholding or (iii) those who, to a Fund's
knowledge, have furnished an incorrect taxpayer identification number.
Generally, to avoid backup withholding, an investor must, at the time an account
is opened, certify under penalties of perjury that the taxpayer identification
number furnished is correct and that he or she is not subject to backup
withholding.
The foregoing discussion relates solely to U.S. Federal income tax law.
Dividends and distributions also may be subject to state, local and foreign
taxes. Dividends paid by a Fund from income attributable to interest on
obligations of the U.S. Government and certain of its agencies and
instrumentalities may be exempt from state and local taxes in certain states.
Shareholders should consult their tax advisers regarding the possible exclusion
of this portion of their dividends for state and local tax purposes. Non-U.S.
investors also should consult their tax advisers concerning the tax consequences
of ownership of shares of a Fund, including the possibility that distributions
may be subject to a 30% United States withholding tax (or a reduced rate of
withholding provided by treaty).
Shareholders of Class A, Class B and Class C shares may direct that income
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<PAGE>
dividends and capital gain distributions be paid to them through various options
listed in the "Dividends and Distributions Reinvestment Options" section of the
Funds' current Prospectus. If a shareholder selects either of two such options
(that: (a) income dividends be paid in cash and capital gain distributions be
paid in additional shares of the same class of a designated Fund at net asset
value; or (b) income dividends and capital gain distributions both be paid in
cash), and the dividend/distribution checks cannot be delivered, or, if such
checks remain uncashed for six months, each Fund reserves the right to reinvest
the dividend or distribution in the shareholder's account at the then-current
net asset value and to convert the shareholder's election to automatic
reinvestment in shares of the Fund from which the distributions were made.
Each Fund has received from the IRS, rulings to the effect that (i) the
implementation of the multiple class purchase arrangement will not result in a
Fund's dividends or distributions constituting "preferential dividends" under
the Code, and (ii) that any conversion feature associated with a class of shares
does not constitute a taxable event under federal income tax law.
UNDERWRITER AND DISTRIBUTION SERVICES
Pursuant to Underwriting Agreements, Northstar Distributors, Inc. is the
Underwriter for each Fund and as such conducts a continuous offering pursuant to
a "best efforts" arrangement requiring it to take and pay for only such
securities as may be sold to the public. The Underwriter is an affiliate of the
Adviser and the Administrator.
The Underwriting Agreements may be terminated at any time on not more than
60 days' written notice, without payment of a penalty, by the Underwriter, by
vote of a majority of the outstanding class of voting securities of the affected
Fund, or by vote of a majority of the Trustees of such Fund, who are not
"interested persons" of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements. The Underwriting
Agreements will terminate automatically in the event of their assignment.
In addition to the amount paid to dealers pursuant to the sales charge
table in the Prospectus, the Underwriter from time to time pays, from its own
resources or pursuant to the Plans, a bonus or other incentive to dealers
(other than the Underwriter) that employ a registered representative who
sells a minimum dollar amount of the shares of a Fund during a specific
period of time. Dealers may not use sales of any of the Fund's shares to
qualify for or participate in such programs to the extent such may be
prohibited by a dealer's internal procedures or by the laws of any state or
any self-regulatory agency, such as the National Association of Securities
Dealers, Inc. Such bonuses or other incentives take the form of payment for
travel expenses, including lodging, incurred in connection with trips taken
by qualifying registered representatives and members of their families to
places within or without the United States, or other bonuses such as
certificates for airline tickets, dining establishments or the cash
equivalent of such bonuses. The Underwriter, from time to time, reallows all
or a portion of the sales charge on Class A shares, which it normally
reallows to individual selling dealers. However, such additional reallowance
generally will be made only when the selling dealer commits to substantial
marketing support such as internal wholesaling through dedicated personnel,
internal communications and mass mailings.
Each Fund has adopted separate distribution plans under Rule 12b-1 of the
1940 Act for each class of shares of the Fund (collectively the "Plans"). The
Plans permit each Fund to compensate the Underwriter in connection with
activities intended to promote the sale of shares of each class of shares of
each Fund.
Pursuant to the Plan for Class A shares, each Fund may compensate the
Underwriter up to 0.30% of average daily net assets of such Fund's Class A
shares. Under the Plans for Class B and Class C shares, each Fund may
compensate the
49
<PAGE>
Underwriter up to 1.00% of the average daily net assets attributable to the
respective class of such Fund. Pursuant to the Plan for Class T shares, each
Fund compensates the Underwriter in an amount equal to 0.95% (in the case of
Growth Fund, Special Fund and Strategic Income Fund), 0.75% (in the case of
Income Fund) and 0.65% (in the case of Government Securities Fund and High Yield
Fund) of annual average daily net assets of such Fund's Class T shares.
However, each of the Class T Plans provides for compensation of up to 1.00% of
annual average daily net assets. Expenditures by the Underwriter under the
Plans shall consist of: (i) commissions to sales personnel for selling shares
of the Funds (including underwriting fees and financing expenses incurred in
connection with the sale of Class B and Class C shares); (ii) compensation,
sales incentives and payments to sales, marketing and service personnel; (iii)
payments to broker-dealers and other financial institutions that have entered
into agreements with the Underwriter in the form of a Dealer Agreement for
Northstar Advantage Funds for services rendered in connection with the sale and
distribution of shares of the Funds; (iv) payment of expenses incurred in sales
and promotional activities, including advertising expenditures related to the
Funds; (v) the costs of preparing and distributing promotional materials; (vi)
the cost of printing the Funds' Prospectus and SAI for distribution to potential
investors; and (vii) other activities that are reasonably calculated to result
in the sale of shares of the Funds. With respect to each Class T Plan, it is
anticipated that all of the payments received by the Underwriter under the Plan
will be paid to Advest as compensation for its prior distribution related and
current shareholder servicing related activities in connection with the Class T
Shares.
A portion of the fees paid to the Underwriter pursuant to the 12b-1 plans
not exceeding 0.25% annually of the average daily net assets of each Fund's
shares may be paid as compensation for providing services to each Fund's
shareholders, including assistance in connection with inquiries related to
shareholder accounts (the "Service Fee"). In order to receive Service Fees
under the Plans, participants must meet such qualifications as are established
in the sole discretion of the Underwriter, such as services to each Fund's
shareholders; or services providing each Fund with more efficient methods of
offering shares to coherent groups of clients, members or prospects of a
participant; or services permitting purchases or sales of shares, or
transmission of such purchases or sales by computerized tape or other electronic
equipment; or other processing.
If the Plans are terminated in accordance with their terms, the obligations
of a Fund to compensate the Underwriter for distribution related services
pursuant to the Plans will cease; however, subject to approval by the Trustees,
including a majority of the independent Trustees, a Fund may continue to make
payments past the date on which each Plan terminates up to the annual limits set
forth in each Plan for the purpose of compensating the Underwriter for services
that were incurred during the term of the Plan.
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<PAGE>
The Trustees have concluded that there is a reasonable likelihood that the
Plans will benefit each Fund and its shareholders and that the Plans should
result in greater sales and/or fewer redemptions of Fund shares. On a quarterly
basis, the Trustees will review a report on expenditures under the Plans and the
purposes for which expenditures were made. The Trustees will conduct an
additional, more extensive review annually in determining whether the Plans
shall be continued. By their terms, continuation of the Plans from year to year
is contingent on annual approval by a majority of the Trustees acting separately
on behalf of each Fund and by a majority of the Trustees who are not "interested
persons" (as defined in the 1940 Act) and who have no direct or indirect
financial interest in the operation of the Plans or any related agreements (the
"Plan Trustees"). The Plans provide that they may not be amended to increase
materially the costs that a Fund may bear pursuant to the applicable Plan
without approval of the shareholders of the affected Fund and that other
material amendments to the Plans must be approved by a majority of the Plan
Trustees acting separately on behalf of each Fund, by vote cast in person at a
meeting called for the purpose of considering such amendments. The Plans
further provide that while each plan is in effect, the selection and nomination
of Trustees who are not "interested persons" shall be committed to the
discretion of the Trustees who are not "interested persons." A Plan may be
terminated at any time by vote of a majority of the Plan Trustees or a majority
of the outstanding Class of shares of the affected Fund to which the Plan
relates.
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<PAGE>
During their fiscal year-ended October 31, 1995, each class of shares of
the Funds listed below paid the following 12b-1 distribution and service fees
pursuant to the Plan of Distribution for each class:
12 b-1 FEES
CLASS A CLASS B CLASS C
Income and Growth Fund $141,250 $473,783 $313,742
High Total Return Fund $ 99,831 $535,252 $ 49,292
For the year ended October 31, 1995, expenses incurred by the Distributor
for distribution related activities with respect to each class of shares of each
Fund listed below were as follows:
INCOME AND GROWTH
CLASS A CLASS B CLASS C
Salaries/Overrides $347,697 $ 55,653 $110,521
Regional Marketing Manager $_______ $_________ $_______
Expenses/Convention Expense $168,576 $ 56,473 $ 21,461
Commissions Paid $_______ $1,070,218 $467,143
Marketing Expense $ 86,328 $_________ $_______
Total $602,601 $1,182,344 $599,125
HIGH TOTAL RETURN FUND
CLASS A CLASS B CLASS C
Salaries/Overrides $530,951 $ 176,089 $ 23,877
Regional Marketing Manager $_______ $_________ $_______
Expenses/Convention Expense $149,561 $ 60,883 $ 5,069
Commissions Paid $_______ $3,009,409 $ 90,784
Marketing Expense $ 70,460 $_________ $_______
Total $750,972 $3,246,381 $119,730
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For the following Funds' fiscal year ended October 31, 1995, the
Distributor received the following amounts in sales charges, after reallowance
to Dealers.
UNDERWRITING FEES
CLASS A CLASS B CLASS C
Income and Growth Fund $221,615 $490,136 $315,723
High Total Return Fund $196,152 $548,708 $ 52,534
During their fiscal year ended December 31, 1995, each class of shares of
the Funds listed below, paid the following 12b-1 distribution and service fees
pursuant to the Distribution Plan for each class.
CLASS A CLASS B CLASS C CLASS T
Government Securities $ 1,392 $ 6,354 $ 32 $973,588
High Yield Fund $ 7,358 $ 59,176 $8,287 $927,236
Strategic Income $93,589 $148,079 $9,767 $278,019
Growth Fund $ 2,523 $ 5,718 $ 245 $737,831
Special Fund $ 3,463 $ 5,097 $ 283 $347,851
Income Fund $ 835 $ 5,264 $ 449 $544,122
During the fiscal year ended December 31, 1995, expenses incurred by the
Distributor (or Advest with respect to Class T Shares prior to June 2, 1995)
for certain distribution related activities with respect to each class of
shares of the Funds listed below were as follows:
<TABLE>
<CAPTION>
GOVERNMENT HIGH
SECURITIES YIELD
EXPENSE FUND FUND
CLASS A CLASS B CLASS C CLASS T CLASS A CLASS B CLASS C CLASS T
------- ------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries/Overrides 17,259 6,140 93 _______ 40,871 72,434 9,138 _______
Regional Marketing Manager _______ _______ -- _______ ______ _________ _______ _______
Expenses/Convention Expense 1,070 484 -- _______ 5,185 4,463 351 _______
Commissions Paid _______ 95,686 45 565,766 ______ 1,154,747 37,794 545,444
Marketing Expense 736 _______ _______ _______ 2,298 _________ _______ _______
STRATEGIC
INCOME
EXPENSE FUND
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
------- ------- ------- -------
<S> <C> <C> <C> <C>
Salaries/Overrides 122,525 29,029 4,915 _______
Regional Marketing Manager _______ _______ _______ _______
Expenses/Convention Expense 55,380 15,605 654 _______
Commissions Paid _______ 503,657 18,664 169,468
Marketing Expense 25,935 _______ _______ _______
</TABLE>
<TABLE>
<CAPTION>
GROWTH SPECIAL
EXPENSE FUND FUND
CLASS A CLASS B CLASS C CLASS T CLASS A CLASS B CLASS C CLASS T
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries/Overrides 5,125 4,369 239 _______ 7,719 4,473 173 _______
Regional Marketing Manager _______ _______ _______ _______ _______ _______ _______ _______
Expenses/Convention Expense 1,742 437 12 _______ 2,375 394 14 _______
Commissions Paid _______ 75,145 482 437,610 _______ 60,874 600 200,958
Marketing Expense 675 _______ _______ _______ 884 _______ _______ _______
INCOME
EXPENSE FUND
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
------- ------- ------- -------
<S> <C> <C> <C> <C>
Salaries/Overrides 3,758 4,132 598 _______
Regional Marketing Manager _______ _______ _______ _______
Expenses/Convention Expense 584 407 21 _______
Commissions Paid _______ 69,328 2,130 316,699
Marketing Expense 257 _______ _______ _______
</TABLE>
For the following Funds' fiscal year ended December 31, 1995, the
Distributor (or Advest) received the following amounts in sales charges,
after reallowance to Dealers:
CLASS A CLASS B CLASS C CLASS T
------- ------- ------- -------
Government Securities $ 46,349 $ 910 $ -0- $326,917
High Yield Fund $214,275 $12,628 $3,561 $403,247
Strategic Income $ 43,244 $ 9,438 $1,136 $ 43,507
Growth Fund $ 15,602 $ 1,644 $ 2 $121,171
Special Fund $ 21,128 $ 800 $ -0- $156,167
Income Fund $ 18,512 $ 444 $ 1 $113,882
53
<PAGE>
TRUSTEES AND OFFICERS
The Trustees and principal Officers of each Fund and their business
affiliations for the past five years are set forth below. Unless otherwise
noted, the mailing address of the Trustees and Officers of the Northstar
Advantage Trust and each Northstar Advantage Fund is c/o the particular Fund,
Two Pickwick Plaza, Greenwich, CT 06830. The current Trustees were elected by
shareholders of the Fund, effective June 2, 1995:
- --------------------------------------------------------------------------------
POSITION
WITH THE TRUST/ BUSINESS AFFILIATIONS
NAME, ADDRESS FUNDS AND PRINCIPAL OCCUPATIONS
- --------------------------------------------------------------------------------
Robert B. Goode, Jr. Trustee Retired. From 1990 to 1991,
Chairman of The First Reinsurance
Company of Hartford. From 1987 to
1989, President and Director of
American Skandia Life Assurance
Company. Since October 1993,
Trustee of the Northstar affiliated
investment companies.
Paul S. Doherty Trustee President, Doherty, Wallace,
Pillsbury and Murphy, P.C.,
Attorneys. Director, Tambrands,
Inc. Since October 1993, Trustee
of the Northstar affiliated
investment companies.
David W. Wallace Trustee Chairman of Putnam Trust Company,
Lone Star Industries and FECO
Engineered Systems, Inc. He is
also President and Trustee of
Robert R. Young Foundation and
Governor of the New York Hospital.
Director of UMC Electronics and
Zurn Industries, Inc. Former
Chairman and Chief Executive
Officer, Todd Shipyards and Bangor
Punta Corporation, and former
Chairman and Chief Executive
Officer of National Securities &
Research Corporation. Since October
1993, Trustee of the Northstar
affiliated investment companies.
Mark L. Lipson* Trustee and Director, Chairman and Chief
President Executive Officer of Northstar and
NWNL Northstar Inc. Director and
President of Northstar
Administrators Corporation and
Director and Chairman of NWNL
Northstar Distributors, Inc.,
President and Trustee of the
Northstar affiliated investment
companies since October 1993.
Prior to August, 1993, Director,
President and Chief Executive
Officer of National Securities &
Research Corporation and President
and Director/Trustee of the
National Affiliated Investment
Companies and certain of National's
subsidiaries.
54
<PAGE>
- --------------------------------------------------------------------------------
POSITION
WITH THE TRUST/ BUSINESS AFFILIATIONS
NAME, ADDRESS FUNDS AND PRINCIPAL OCCUPATIONS
- --------------------------------------------------------------------------------
John G. Turner* Trustee and Since May 1993, Chairman and CEO of
Chairman of ReliaStar and Northwestern National
the Board Life Insurance Co. and Chairman of other
ReliaStar Affiliated Insurance Companies
since 1995. Since October 1993, Director
of Northstar and affiliates. Prior to
May 1993, President and CEO of ReliaStar
and Northwestern National.
Alan L. Gosule Trustee Partner, Rogers & Wells. Director,
F.L. Putnam Investment Management
Co., Inc.
David W.C. Putnam Trustee President, Clerk and Director of
F.L. Putnam Securities Company,
Incorporated, F.L. Putnam
Investment Management Company,
Incorporated, Interstate Power
Company, Inc., Trust Realty Corp.
and Bow Ridge Mining Co.; Director
of Anchor Investment Management
Corporation; President and Trustee
of Anchor Capital Accumulation
Trust, Anchor International Bond
Trust, Anchor Gold and Currency
Trust, Anchor Resources and
Commodities Trust and Anchor
Strategic Assets Trust.
John R. Smith Trustee Financial Vice President of Boston
College (1970-1991); President
(since 1991) of New England
Fiduciary Company (financial
planning); Chairman (since 1987) of
Massachusetts Educational Financing
Authority; Vice Chairman of
Massachusetts Health and Education
Authority.
Walter H. May Trustee Retired. Former Marketing Director
for Piper Jaffrey, Inc.
Ernest N. Mysogland Vice (Income and Growth Fund, Growth
President Fund, Income Fund, Special Fund).
Executive Vice President and Chief
Investment Officer-Equities of
Northstar. From 1992 to August
1993, Senior Vice President and
Chief Investment Officer-Equities
of National Securities & Research
Corporation and Vice President of
National Affiliated Investment
Companies. Prior to joining
National in 1992, Mr. Mysogland was
the President & Chief Investment
Officer of Reinoso Asset
Management. From 1988 to 1991, Mr.
Mysogland was Executive Vice
President and Chief Investment
Officer of Gintel Equity
Management.
55
<PAGE>
- --------------------------------------------------------------------------------
POSITION
WITH THE TRUST/ BUSINESS AFFILIATIONS
NAME, ADDRESS FUNDS AND PRINCIPAL OCCUPATIONS
- --------------------------------------------------------------------------------
Thomas Ole Dial Vice (High Total Return Fund, Income
President Fund, Strategic Income Fund, High
Yield Fund, Government Securities
Fund). Executive Vice President
and Chief Investment Officer-Fixed
Income of Northstar and Principal,
T.D. & Associates, Inc. From 1989
to August 1993, Executive Vice
President and Chief Investment
Officer-Fixed Income of National
Securities & Research Corporation,
Vice President of National
Affiliated Investment Companies,
and Vice President of NSR Asset
Management Corp. From 1988 to
1989, President, Dial Capital
Management.
Margaret D. Patel Vice (Government Securities Fund, Income
President Fund, Strategic Income Fund). Vice
President and Managing Director of
Northstar. Former Senior Vice
President of BSC (1988 to May
1995); Former President and
Portfolio Manager at Fixed Income
Asset Management, Inc. (1986 to
1988); Former Portfolio Manager at
American Capital and Dreyfus
Corporation (prior to 1988).
Prescott B. Crocker CFA, (Strategic Income Fund, High Yield
Vice Fund). Vice President and Managing
President Director of Northstar. Former
Senior Vice President and Director,
Fixed Income Investments of BSC
(November 1993 to May 1995); Former
Senior Portfolio Manager at
Colonial Management Associates,
Inc. (1975-1993); prior to 1993,
Mr. Crocker served in various
senior investment management
positions at Colonial Management
Associates, Inc.
Geoffrey Wadsworth Vice (Income and Growth Fund, Growth
President Fund, Special Fund). Vice President
of Northstar. Co-Manager of
Northstar Advantage Income and
Growth Fund and other Northstar
affiliated equity funds. Former
Vice President and Portfolio
Manager with National Securities &
Research Corporation.
56
<PAGE>
- --------------------------------------------------------------------------------
POSITION
WITH THE TRUST/ BUSINESS AFFILIATIONS
NAME, ADDRESS FUNDS AND PRINCIPAL OCCUPATIONS
- --------------------------------------------------------------------------------
Agnes Mullady Vice Senior Vice President and Chief
President and Financial Officer of Northstar,
Treasurer Senior Vice President and Treasurer
of Northstar Administrators
Corporation, and Vice President and
Treasurer of NWNL Northstar
Distributors, Inc. From 1987 to
1993 Treasurer and Vice President
of National Securities & Research
Corporation.
Lisa M. Hurley Vice Senior Vice President, General
President and Counsel of Northstar. Executive
Secretary Vice President and Secretary of
Northstar Administrators
Corporation, and Vice President and
Secretary of NWNL Northstar
Distributors, Inc. Former Vice
President and General Counsel of
National Securities & Research
Corporation.
*Deemed to be an "interested person" of the Trust, as defined by the 1940 Act.
Mone Anathan, III, Dr. Loring E. Hart, Reverend Bartley MacPhaidin and
Edward T. Sullivan, each of whom were previously Trustees of the Funds, serve
on an Advisory Board. The Advisory Board is expected to provide advice to the
Board of Trustees in order to facilitate a smooth management transition
regarding the advisory services to be provided by Northstar and to provide
such other advise as the Board of Trustees may request from time to time.
The Advisory Board will have no authority or control over the Funds.
Northstar has agreed to assume all expenses associated with the Advisory
Board for three years.
Northstar and Northstar Administrators Corporation make their personnel
available to serve as Officers and "Interested Trustees" of the Funds. All
Officers and Interested Trustees of the Funds are compensated by Northstar or
Northstar Administrators Corporation. Trustees who are not "interested persons"
of the Adviser are paid an annual retainer fee of $6,000 for their combined
services as Trustees to the Funds and to retail funds sponsored or advised by
the Adviser, and a per meeting fee of $1,500 for attendance at each joint
meeting of the Funds and the other Northstar retail funds. The Funds also
reimburse Trustees for expenses incurred by them in connection with such
meetings.
As of January 31, 1996, all Trustees and executive officers of each Fund
as a group owned beneficially or of record less than 1% of the outstanding
securities of such Fund.
To the knowledge of the Funds, as of January 31, 1996, no shareholder
owned beneficially(b) or of record(r) more than 5% of a Fund's outstanding
shares, except as set forth below:
(1) Strategic Income Fund
---------------------
Merrill Lynch Pierce Fenner & Smith 10% (r)
Jacksonville, Fla.
Norwest Bank 6% (r)
Minneapolis, MN
Northern Life Ins. Co. 8% (r)
Minneapolis, MN
(2) High Yield Fund
---------------
Merrill Lynch Pierce Fenner & Smith 10% (r)
Jacksonville, Fla.
(3) Income and Growth Fund
----------------------
Merrill Lynch Pierce Fenner & Smith 13%(r)
Jacksonville, Fla.
Norwest Bank 11.7%(r)
Minneapolis, MN
(4) High Total Return Fund
----------------------
Merrill Lynch Pierce Fenner & Smith 21%(r)
Jacksonville, Fla.
57
<PAGE>
COMPENSATION TABLE
Fiscal year Ended October 31, 1995
Northstar Advantage Trust
(Income and Growth, High Total Return
and the former Northstar Advantage Multi Sector Bond Fund)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PENSION OR RETIREMENT TOTAL COMPENSATION FROM
AGGREGATE COMPENSATION BENEFITS ACCRUED AS PART ESTIMATED ANNUAL ALL FUNDS CURRENTLY IN
NAME, FROM EACH FUND OF FUND EXPENSES BENEFITS UPON NORTHSTAR FUNDS
POSITION RETIREMENT COMPLEX(b)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alan L. Gosule, Esq. $1,417 N/A N/A $14,950
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
John R. Smith, Ph.D. $1,667 N/A N/A $15,350
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
David W.C. Putnam $1,417 N/A N/A $22,750
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
Robert B. Goode, Jr. $4,083 N/A N/A $13,750
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
Paul S. Doherty $4,083 N/A N/A $15,250
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
David W. Wallace $4,083 N/A N/A $15,250
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark L. Lipson -0- N/A N/A -0-
(President and
Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
John G. Turner -0- N/A N/A -0-
(Chairman and Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
58
<PAGE>
COMPENSATION TABLE
Fiscal year Ended December 31, 1995
Government Securities, Strategic Income, High Yield, Income,
Growth and Special Funds
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PENSION OR RETIREMENT TOTAL COMPENSATION FROM
AGGREGATE COMPENSATION BENEFITS ACCRUED AS ESTIMATED ANNUAL ALL FUNDS CURRENTLY IN
NAME, FROM EACH FUND(a) PART OF FUND EXPENSES BENEFITS UPON NORTHSTAR FUNDS
POSITION RETIREMENT COMPLEX(b)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alan L. Gosule, Esq. $1,908 $1,908 $1,908 N/A N/A $14,950
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
John R. Smith, Ph.D. $1,934 $1,934 $1,933 N/A N/A $15,350
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
David W.C. Putnam $5,258 $4,774 $1,460 N/A N/A $22,750
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
Robert B. Goode, Jr. $ 708 $ 708 $ 708 N/A N/A $13,750
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
Paul S. Doherty $ 708 $ 708 $ 708 N/A N/A $15,250
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
David W. Wallace $ 708 $ 708 $ 708 N/A N/A $15,250
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark L. Lipson $ -0- $ -0- $ -0- N/A N/A $ -0-
(President and
Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
John G. Turner $ -0- $ -0- $ -0- N/A N/A $ -0-
(Chairman and
Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PENSION OR RETIREMENT TOTAL COMPENSATION FROM
AGGREGATE COMPENSATION BENEFITS ACCRUED AS ESTIMATED ANNUAL ALL FUNDS CURRENTLY IN
NAME, FROM EACH FUND(a) PART OF FUND EXPENSES BENEFITS UPON NORTHSTAR FUNDS
POSITION RETIREMENT COMPLEX(b)
- ------------------------------------------------------------------------------------------------------------------------------------
Income Special Growth
<S> <C> <C> <C> <C> <C> <C>
Alan L. Gosule, Esq. $1,908 $3,408 $1,908 N/A N/A $14,950
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
John R. Smith, Ph.D. $1,934 $3,433 $1,934 N/A N/A $15,350
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
David W.C. Putnam $2,906 $3,366 $2,984 N/A N/A $22,750
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
Robert B. Goode, Jr. $ 708 $ 708 $ 708 N/A N/A $13,750
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
Paul S. Doherty $ 708 $ 2208 $ 708 N/A N/A $15,250
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
David W. Wallace $ 708 $ 2208 $ 708 N/A N/A $15,250
(Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark L. Lipson $ -0- $ -0- $ -0- N/A N/A $
(President and
Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
John G. Turner $ -0- $ -0- $ -0- N/A N/A $
(Chairman and
Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Prior to June 2, 1995 the Trustees who were not interested persons,
other than David Putman, were paid a per fund fee of $500 for each
full calendar year during which services were rendered to the Funds.
In addition, they were paid a per fund fee of $250 for attending each
of the Trustees' meetings, $100 per fund for attending each audit
committee meeting, $100 audit committee retainer per fund and were
reimbursed for out-of-pocket expenses. Mr. Putnam, former Chairman of
these Funds, received a fee of $30,000 per annum.
(b) Compensation paid by six Advantage Fund trusts formerly advised by
BSC, the Northstar Advantage Trust funds and the Northstar/NWNL &
Trust funds.
59
<PAGE>
OTHER INFORMATION
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P. has been selected as the independent
accountants of the Northstar Advantage Trust and each Northstar Advantage
Fund. Coopers & Lybrand L.L.P. audits the Funds' annual financial statements
and expresses an opinion thereon.
CUSTODIAN
Custodial Trust Company, Princeton, New Jersey, acts as custodian for
the High Total Return and Income and Growth Funds, and First Data Investor
Services, Inc. ("First Data"), Boston, Massachusetts, serves as fund
accounting agent for these Funds; State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, acts as custodian, and fund
accounting agent for the remaining Funds.
TRANSFER AGENT
Pursuant to a Transfer Agency Agreement with each Fund, First Data (the
"Transfer Agent") acts as the Transfer Agent for each Fund. Pursuant to a
Sub-Transfer Agency Agreement between Advest Transfer Services, Inc. ("ATS")
and First Data, ATS serves as the sub-transfer agent for the Funds offering
Class T shares, and, prior to June 5, 1995, ATS acted as transfer agent to
these Funds.
REPORTS TO SHAREHOLDERS
The fiscal year of the Northstar Advantage Trust ends on October 31. The
fiscal year of each other Fund ends on December 31. Each Fund will send
financial statements to its shareholders at least semi-annually. An annual
report containing financial statements audited by the independent
60
<PAGE>
accountants will be sent to shareholders each year.
ORGANIZATIONAL AND RELATED INFORMATION
Government Securities Fund (formerly The Advantage Government
Securities Fund) was organized in 1986; Strategic Income Fund (formerly The
Advantage Strategic Income Fund) was organized in 1994; High Yield Fund
(formerly The Advantage High Yield Bond Fund) was organized 1989; Income Fund
(formerly The Advantage Income Fund) was organized in 1986; Growth Fund
(formerly The Advantage Growth Fund) was organized in 1986; and Special Fund
(formerly The Advantage Special Fund) was organized in 1986. Northstar
Advantage Trust (formerly NWNL Northstar Series Trust), and two of its series
High Total Return Fund (formerly NWNL Northstar High Yield Bond Fund) and
Income and Growth Fund (formerly NWNL Northstar Income and Growth Fund), was
organized in 1993.
The shares of each Fund, when issued, will be fully paid and non-
assessable, have no preference, preemptive, or similar rights, and will be
freely transferable. There will normally be no meetings of shareholders for the
purpose of electing Trustees unless and until such time as less than a majority
of the Trustees holding office have been elected by shareholders, at which time
the Trustees then in office will call a shareholders' meeting for the election
of Trustees. Shareholders may, in accordance with the Declaration of Trust,
cause a meeting of shareholders to be held for the purpose of voting on the
removal of Trustees. Meetings of the shareholders will be called upon written
request of shareholders holding in the aggregate not less than 10% of the
outstanding shares of the affected Fund or class having voting rights. Except
as set forth above and subject to the 1940 Act, the Trustees will continue to
hold office and appoint successor Trustees.
Under Massachusetts law, there is a remote possibility that shareholders of
a business trust could, under certain circumstances, be held personally liable
as partners for the obligations of such trust. The Amended and Restated
Declaration of Trust for each Fund contains provisions intended to limit such
liability and to provide indemnification out of Fund property of any shareholder
charged or held personally liable for obligations or liabilities of a Fund
solely by reason of being or having been a shareholder of a Fund and not because
of such shareholder's acts or omissions or for some other reason. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which a Fund itself would be unable to
meet its obligations.
PERFORMANCE INFORMATION
Performance information for the Funds may be compared in reports and
promotional literature to (1) the S&P 500, Dow Jones Industrial Average
("DJIA"), or other unmanaged indices, so that investors may compare each Fund's
results to those of a group of unmanaged securities that are widely regarded by
investors as representative of the securities markets in general; (ii) other
groups of mutual funds tracked by Lipper Analytical Services, Inc., a widely
used independent research firm that ranks mutual funds by overall performance,
investment objectives, and assets, or tracked by other services, companies,
publications or persons who rank mutual funds on overall performance or other
criteria; (iii) the Consumer Price Index (measure for inflation) to assess the
real rate of return from an investment in a Fund; and (iv) well known monitoring
sources of CD performance rates, such as Solomon Brothers, Federal Reserve
Bulletin, American Bankers and Tower Data/The Wall Street Journal. Unmanaged
indices may assume the reinvestment of dividends, but generally do not reflect
deductions for administrative and management costs and expenses. Performance
rankings are based on historical information and are not intended to indicate
future performance.
In addition, the Funds may, from time to time, include various measures of
a Fund's performance, including the current yield, the tax-equivalent yield and
the average annual total return of shares of the Funds in advertisements,
promotional literature or reports to shareholders or prospective investors.
Such materials may occasionally cite statistics to reflect a Fund's volatility
risk.
61
<PAGE>
TOTAL RETURN
Standardized quotations of average annual total return ("Standardized
Return") for each class of shares will be expressed in terms of the average
annual compounded rate of return for a hypothetical investment in such class of
shares over periods of 1, 5 and 10 years or up to the life of the class of
shares, calculated for each class separately pursuant to the following formula:
P(1+T)TO THE POWER OF n = ERV (where P = a hypothetical initial payment of
$1,000, T = the average annual total return, n = the number of years, and ERV =
the ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period). All total return figures reflect the deduction of a
proportional share of each Class's expenses (on an annual basis), the deduction
of the maximum initial sales load (in the case of Class A shares) and the
maximum contingent deferred sales charge applicable to a complete redemption of
the investment (in the case of Class B, Class C and Class T shares), and assume
that all dividends and distributions are reinvested when paid.
YIELD
Quotations of yield for a specific class of shares of a Fund will be based
on all investment income attributable to that class earned during a particular
30-day (or one month) period (including dividends and interest), less expenses
accrued during the period ("net investment income"), and will be computed by
dividing the net investment income per share of that class earned during the
period by the maximum offering price per share on the last day of the month,
according to the following formula:
Yield = 2[(a-b + 1)TO THE POWER OF 6 -1]
---
cd
Where:
a = dividends and interest earned during the period attributable to a
specific class of shares
b = expenses accrued for the period attributable to that class (net of
reimbursements)
c = the average daily number of shares of that class outstanding during
the period that were entitled to receive dividends, and
d = the maximum offering price per share on the last day of the period
The maximum offering price includes a maximum contingent deferred sales
load of 4%, in the case of Class T shares, 5% for Class B shares, and 1%, for
Class C shares.
All accrued expenses are taken into account as follows. Accrued expenses
include all recurring expenses that are charged to all shareholder accounts in
proportion to the length of the base period, including but not limited to
expenses under the Funds' distribution plans. Except as noted, the performance
results take the contingent deferred sales load into account.
The yield for Class A, B, C and T shares of the Government Securities Fund,
the High Yield
62
<PAGE>
Fund, the Strategic Income Fund, and the Income Fund for the month ended
December 31, 1995, and the yield for Class A, B and C of the High Total Return
Fund for the month ended October 31, 1995 was as follows:
YIELD
FUND CLASS A CLASS B CLASS C CLASS T
Government Fund 5.58% 5.26% 5.24% 5.53%
High Yield Fund 8.43 8.09 8.14 8.53
Strategic Income Fund 5.68 5.34 5.38 5.45
Income Fund 3.95 3.20 2.40 3.48
High Total Return Fund 10.42 10.25 10.20 N.A
NON-STANDARDIZED TOTAL RETURN
In addition to the performance information described above, the Funds may
provide total return information that is not calculated according to the formula
set forth above ("None-Standardized Return"). Neither initial nor contingent
deferred sales charges are taken into account in calculating Non-Standardized
Return. Excluding a Fund's sales charge from a total return calculation
produces a higher total return figure.
The following table summarizes the calculation of Standardized and Non-
Standardized Return for Class A, Class B and Class C shares of each Fund in
Northstar Advantage Trust and for Class A, Class B, Class C and Class T shares
of the other Funds for the periods indicated.
NORTHSTAR ADVANTAGE TRUST. The following table summarizes the calculation
of Total Return for the periods indicated through October 31, 1995, assuming the
contingent deferred sales load HAS been assessed.
SINCE
ONE YEAR INCEPTION*
HIGH TOTAL RETURN FUND
Class A 7.66% 2.14%
Class B 6.97% (1.05)%
Class C 11.44% 2.38%
INCOME AND GROWTH FUND
Class A 6.93% 4.68%
Class B 6.41% 1.57%
Class C 10.43% 5.79%
The following table summarizes the calculation of Total Return for the
periods indicated
63
<PAGE>
through October 31, 1995, assuming the contingent deferred sales load HAS NOT
been assessed.
SINCE
ONE YEAR INCEPTION*
HIGH TOTAL RETURN FUND
Class A 13.02% 4.68%
Class B 11.97% 0.94%
Class C 12.44% 2.38%
INCOME AND GROWTH FUND
Class A 13.19% 7.29%
Class B 12.31% 3.84%
Class C 12.33% 5.79%
___________________________
* The inception date for Class A, Class B and Class C shares of High Total
Return Fund and Income and Growth Fund is November 8, 1993, February 9,
1994 and March 21, 1994, respectively.
THE REMAINING FUNDS. The following table summarizes the calculation of
Total Return for Class T shares of the remaining Funds for the periods indicated
through December 31, 1995, assuming the maximum sales charge HAS been assessed.
SINCE
ONE YEAR FIVE YEARS INCEPTION*
Government Securities Fund 18.90% 65.37% 113.54%
High Yield Fund 9.71% 147.14% 92.51%
Income Fund 21.11% 76.92% 149.45%
Growth Fund 20.46% 89.16% 183.42%
Special Fund 7.34% 129.28% 143.95%
Strategic Income Fund 10.54% N/A 13.99%
The following table summarizes the calculation of Total Return for Class T
shares of the remaining Funds for the periods indicated through December 31,
1995, assuming the maximum sales charge HAS NOT been assessed.
SINCE
ONE YEAR FIVE YEARS INCEPTION*
Government Securities Fund 22.9 % 65.37% 113.54%
High Yield Fund 13.31% 147.14% 92.51%
64
<PAGE>
Income Fund 25.11% 76.92% 149.45%
Growth Fund 24.40% 89.16% 183.42%
Special Fund 11.34% 129.28% 143.95%
Strategic Income Fund 12.39% N/A 16.99%
___________________________
* The inception date for Class T shares of Government Securities, Income,
Growth and Special Funds was February 1, 1986. The inception date for
Class T shares of the High Yield Fund was July 5, 1989. The inception date
for Class T shares of the Strategic Income Fund was July 1, 1994.
The following table summarizes the calculation of Total Return for Class A,
Class B and Class C shares of the remaining Funds for the period from
commencement of operations of such classes (June 5, 1995) through December 31,
1995, assuming the maximum sales charge HAS been assessed.
CLASS A CLASS B CLASS C
Government Securities Fund 5.08% 4.83% 8.83%
High Yield Fund (0.78)% (1.11)% 2.83%
Income Fund 6.69% 6.75% 10.60%
Growth Fund 6.23% 6.86% 10.29%
Special Fund 6.85% 6.79% 10.79%
Strategic Income Fund 1.04% 0.54% 4.47%
The following table summarizes the calculation of Total Return for Class A,
Class B and Class C shares of the remaining Funds for the period from
commencement of operations of such classes (June 5, 1995) through December 31,
1995, assuming the maximum sales charge HAS NOT been assessed.
CLASS A CLASS B CLASS C
Government Securities Fund 10.04% 9.61% 9.61%
High Yield Fund 11.48% 4.17% 4.17%
Income Fund 11.95% 11.56% 11.49%
Growth Fund 11.55% 11.27% 11.17%
Special Fund 12.20% 11.79% 11.79%
Strategic Income Fund 6.40% 5.89% 5.81%
OTHER INFORMATION CONCERNING FUND PERFORMANCE
A Fund may quote its performance in various ways, using various types of
comparisons to market indices, other funds or investment alternatives, or to
general increases in the cost of living. All performance information supplied
by the Funds in advertising is historical and is not intended to indicate future
returns. Each Fund's share prices and total returns fluctuate in response to
market conditions and other factors, and the value of the Fund's shares when
redeemed may be more or less
65
<PAGE>
than their original cost.
Evaluations of Fund performance made by independent sources may also be
used in advertisements concerning the Funds, including reprints of, or
selections from, editorials or articles about a Fund. These editorials or
articles may include quotations of performance from other sources, such as
Lipper or Morningstar. Sources for Fund performance information and articles
about the Fund may include the following: BANXQUOTE, BARRON'S, BUSINESS WEEK,
CDA INVESTMENT TECHNOLOGIES, INC., CHANGING TIMES, CONSUMER DIGEST, FINANCIAL
WORLD, FORBES, FORTUNE, IBC/DONOGHUES'S MONEY FUND REPORT, IBBOTSON ASSOCIATES,
INC., INVESTMENT COMPANY DATA, INC., INVESTOR'S DAILY, LIPPER ANALYTICAL
SERVICES, INC.'S MUTUAL FUND PERFORMANCE ANALYSIS, MONEY, MUTUAL FUND VALUES,
THE NEW YORK TIMES, PERSONAL INVESTING NEWS, PERSONAL INVESTOR, SUCCESS, USA
TODAY, U.S. NEWS AND WORLD REPORT, WALL STREET JOURNAL, WIESENBERGER INVESTMENT
COMPANIES SERVICES, WORKING WOMAN.
When comparing yield, total return and investment risk of shares of a Fund
with other investments, investors should understand that certain other
investments have different risk characteristics than an investment in shares of
the Fund. For example, certificates of deposit may have fixed rates of return
and may be insured as to principal and interest by the FDIC, while a Fund's
returns will fluctuate and its share values and returns are not guaranteed.
Money market accounts offered by banks also may be insured by the FDIC and may
offer stability of principal. U.S. Treasury securities are guaranteed as to
principal and interest by the full faith and credit of the U.S. government.
Money market mutual funds may seek to offer a fixed price per share.
The performance of a Fund is not fixed or guaranteed. Performance
quotations should not be considered to be representative of performance of the
Fund for any period in the future. The performance of a Fund is a function of
many factors including its earnings, expenses and number of outstanding shares.
Fluctuating market conditions; purchases, sales and maturities of portfolio
securities; sales and redemptions of shares of beneficial interest, and changes
in operating expenses are all examples of items that can increase or decrease
the Fund's performance.
FINANCIAL STATEMENTS
The Northstar Advantage Trust's audited financial statements dated October
31, 1995 and the report of the independent accountants, Coopers & Lybrand
L.L.P. with respect to such financial statements, are hereby incorporated by
reference to the Annual Report to Shareholders of the Northstar Advantage Trust
for the fiscal year ended October 31, 1995.
The audited financial statements of Government Securities Fund, High
Yield Fund, Income Fund, Growth Fund, Special Fund and Strategic Income Fund
as of and for the fiscal period ended December 31, 1995 and the report of the
independent accountants, Coopers & Lybrand L.L.P., with respect to such
financial statements are hereby incorporated by reference to the Annual
Report to Shareholders of The Advantage Family of Funds for the fiscal year
ended December 31, 1995.
66
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements: Included in Part A:
NORTHSTAR ADVANTAGE TRUST - Financial Highlights for a share outstanding
throughout the period November 8, 1993 (Class A) February 9, 1994 (Class B) and
March 21, 1994 (Class C) (commencement of offering of each Class) through
October 31, 1995.
GOVERNMENT SECURITIES, INCOME, GROWTH AND SPECIAL FUNDS:
Financial Highlights for a share outstanding throughout the period February 3,
1986 (commencement of operations) to December 31, 1995.
HIGH YIELD FUND: Financial Highlights for a share outstanding throughout
the period June 5, 1989 (commencement of operations) through December 31, 1995.
STRATEGIC INCOME FUND: Financial Highlights for a share outstanding
throughout the period July 1, 1994 (commencement of operations) to December 31,
1995.
Included in Part B: The audited financial statements for the year ended
October 31, 1995 for the Northstar Advantage Trust and for the year ended
December 31, 1995 for the Government Securities, Strategic Income, High Yield,
Income, Growth and Special Funds, and the report of the independent accountants
with respect to such financial statements are incorporated in the Statement of
Additional Information for the Trust and each Fund by reference to the Annual
Report to Shareholders for the Trust and each Fund for the fiscal years ended
October 31, 1995 and December 31, 1995, respectively. The incorporated
financial information for the years ended October 31, 1995 for the Trust and
December 31, 1995 for the other Funds includes the following: Statement of
Investments, Statement of Assets and Liabilities, Statement of Operations,
Statement of Changes in Net Assets, Financial Highlights, Notes to Financial
Statements, and report of independent accountants.
<PAGE>
(b) EXHIBITS - NORTHSTAR ADVANTAGE TRUST
(1) Form of Declaration of Trust*
(2) By-Laws*
(3)(4) N/A
(5) Investment Advisory Agreement*
(6) Underwriting Agreements*
(7) N/A
(8) Custody Agreement*
(9) (a) Transfer Agency Agreement*
(b) Administration Agreement*
(c) Administrative Services Agreement*
(10) Opinion of Counsel*
(11) Consent of Independent Public Accountants*
(12) Not Applicable
(13) N/A
(14 N/A
(15) Plans of Distribution pursuant to Rule 12b-1*
(16) Performance Information*
(17) Power of Attorney *1
(18) Inapplicable
(27) Financial Data Schedule (EX-27)*
- --------------------
* Filed herewith
(1) Except for Power of Attorney executed by Walter H. May, Powers of Attorney
were filed as an Exhibit to Registrant's PEA No. 6 and are incorporated
herein by reference.
<PAGE>
EXHIBITS - GOVERNMENT SECURITIES, INCOME, GROWTH, SPECIAL, HIGH YIELD AND
STRATEGIC INCOME FUNDS.
(1) Form of Amended and Restated Declaration of Trust (1)
(2) By-Laws (1)
(3)(4) Not Applicable
(5) (a) Form of Investment Advisory Agreement (1)
(6) (a)-(d) Form of Underwriting Agreements for Classes A, B, C and T
Shares (1)
(e) Form of Dealer Agreement for Northstar Affiliated Investment Cos.
(1)
(f) Form of Special Dealer Agreement between Northstar Distributors
and Advest, Inc. (1)
(7) Not Applicable
(8) Form of Custody Agreement (1)
(9) (a) Form of Transfer Agency Agreement (1)
(b) Form of Sub-Transfer Agency Agreement (1)
(c) Form of Administrative Services Agreement (1)
(d) Administration Agreement*
(10) Opinion of Counsel*
(11) Consent of Independent Public Accountants*
(12) Annual Report to Shareholders*
(13) Not Applicable
(14) Not Applicable
(15) Form of Distribution Plan for Classes A, B, C and T Shares (1)
(16) Performance Information*
(17) Power of Attorney #2
(18) Not Applicable
(27) Financial Data Schedules (EX-27)*
- --------------------
NOTES TO EXHIBIT LISTING
* Filed herewith
(1) Previously filed as an Exhibit to the Registrant's Post-Effecitve Amendment
as follows and incorporated herein by reference: Government Securities Fund -
PEA No. 16; Income Fund - PEA No. 15; Growth Fund - PEA No. 15; Special Fund -
PEA No. 15; High Yield Fund - PEA No. 11; Strategic Income Fund - PEA No. 7.
(2) Except for the Power of Attorney executed by Walter May, all powers of
Attorney were filed as an Exhibit to the Registrant's Post-Effective
Amendment as follows and are incorporated herein by reference: PEA No.
6-Strategic Income Fund; PEA No. 10-High Yield Fund; PEA No. 15-Government
Securities Fund; PEA No. 14-Income Fund, Growth Fund and Special Fund.
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
There are no persons controlled by or under common control with Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of January 31, 1996, the Registrant had the following number of record
security holders:
Title of Class Fund Number of Shareholders
- -------------- ---- ----------------------
Shares of Income & Growth Fund (A) 1576 (B) 2337 (C) 1588
Benefical High Total Return Fund (A) 3493 (B) 4607 (C) 572
Interest Government Securities (A) 103 (B) 323 (C) 4 (T) 6788
High Yield Bond (A) 469 (B) 1722 (C) 99 (T) 8602
Income (A) 73 (B) 363 (C) 24 (T) 5529
Growth (A) 155 (B) 481 (C) 26 (T) 7191
Special (A) 192 (B) 460 (C) 12 (T) 4118
Strategic Income (A) 368 (B) 937 (C) 73 (T) 2035
<PAGE>
ITEM 27. INDEMNIFICATION
Section 5.4 of Registrant's Declaration of Trust provides the following:
(a) Subject to Paragraph (c) hereof every person who is, or has been, a
Trustee, Officer, employee or agent of the Trust shall be indemnified by the
Trust to the fullest extent permitted by law against all liability and against
all expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or otherwise
by virtue of his being or having been a Trustee, officer, employee or agent and
against amounts paid or incurred by him in the settlement thereof in such
manner, provided, that to the extent any claim, action, suit or proceeding
involves any particular Series or Classes of Shares of the Trust or the assets
or operations of one or more Series or Classes of Shares, such indemnification
shall be provided only from the assets (or proceeds thereof or income therefrom)
of such one or more Series or Classes of Shares and not from the assets (or
proceeds thereof or income therefrom) of any other Series or Class of Shares of
the Trust.
(b) The words "claim", "action", "suit" or "proceeding" shall apply to all
claims, actions, suits or proceedings (civil, criminal, or other including
appeals), actual or threatened; and the words "liability" and "expenses" shall
include without limitation, attorneys fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(c) No indemnification shall be provided hereunder to a Trustee or officer:
(i) against any liability to the Trust, a series thereof, or the
Shareholders by reason of a final adjudication by a court or other body
before which a proceeding was brought or that he engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in reasonable belief that his
action was in the best interest of the Trust; and
(iii) in the event of a settlement or other disposition not involving a
final adjudication as provided in paragraph (b) (i) or (b) (ii) resulting
in a payment by a Trustee or officer, unless there has been a determination
that such Trustee or officer did not engage in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office:
(A) by the court or other body approving the settlement or other
disposition; or
(B) based upon the review of readily available facts (as opposed to full
trial-type inquiry) by (x) vote of a majority of the Disinterested
Trustees acting on the matter (provided that a majority of the
Disinterested Trustees then in office act on the matter) or (y)
written opinion of independent legal counsel.
<PAGE>
(d) The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not
affect any other rights to which any Trustee or officer may now or
hereafter be entitled, shall continue as to a person who has ceased to
be such Trustee or officer and shall inure to the benefit of the
heirs, executors, administrators and assigns of such a person.
Nothing contained herein shall affect any rights to indemnification to
which personnel of the Trust other than Trustees and officers may be
entitled by contract or otherwise under law.
(e) Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in paragraph (a)
of this Section may be advanced by the Trust prior to final
disposition thereof upon receipt of an undertaking by or on behalf of
the recipient to repay such amount if it is ultimately determined that
he is not entitled to indemnification under this Section, provided
that either:
(i)such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient or the Trust shall be
insured against losses arising out of any such advances; or
(ii) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees act on the
matter) or an independent legal counsel in a written opinion shall
determine, based upon a review of readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that
the recipient ultimately will be found entitled to indemnification.
As used in this Section, a "Disinterested Trustee" is one who is not (i) an
Interested Person of the Trust (including anyone who has been exempted from
being an Interested Person by any rule, regulation or order of the Commission),
or (ii) involved in the claim, action, suit or proceeding.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Trustee, officer or controlling person of the Registrant in
connection with the successful defense of any action suit or proceeding) is
asserted by such Trustee, officer or controlling person in connection with the
shares being registered, the Registrant will, unless in the opinion if its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy, as expressed in the Act and be governed by final
adjudication of such issue.
<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See "Management of the Funds" in the Prospectus and Services of the Adviser and
Administrator" and "Trustees and Officers" in the Statement of Additional
Information, each of which is included in the Registration Statement.
Set forth is a list of each officer and director of the Adviser indicating each
business, profession, vocation or employment of a substantial nature in which
each such person has been engaged since January 31, 1994.
POSITION WITH OTHER SUBSTANTIAL
INVESTMENT BUSINESS, PROFESSION
NAME ADVISER VOCATION OR EMPLOYMENT
- ---- ------- ----------------------
John Turner Director Chairman and CEO, ReliaStar Financial Corp.
and affiliates; Director of Northstar
Affiliates; Trustee and Chairman, Northstar
Affiliated Investment Companies.
John Flittie Director President, ReliaStar Financial Corp. and
affiliates; Director, Northstar Affiliates.
Mark L. Lipson Chairman/CEO Director and Officer of Northstar
Director Distributors, Inc., Northstar Administrators
Corp. and NWNL Northstar, Inc. Trustee
and President, Northstar Affiliated
Investment Companies.
Robert J. Adler Executive President Northstar Distributors, Inc.
Vice
President,
Sales &
Marketing
Thomas Ole Dial Executive Vice President, Northstar Affiliated
Vice Investment Companies, and Principal, TD
President - Associates Inc.
Chief
Investment
Officer,
Fixed Income
Ernest Mysogland Exec.Vice Vice President - Northstar Affiliated
President Investment Companies.
Chief
Investment
Officer -
Equities
Prescott Crocker Vice Vice President, Northstar Affiliated Invest-
President/ ment Cos. Former Vice President and Port-
Managing folio Manager for Boston Security
Director Counsellors, Inc.
<PAGE>
Margaret Patel Vice Vice President, Northstar Affiliate Invest-
President/ ment Cos. Former Vice President and Port-
Managing folio Manager for Boston Security
Director Cousellors, Inc.
Geoffrey Wadsworth Vice Vice President - Northstar Affiliated
President/ Investment Companies.
Investments
and Portfolio
Manager
Jeffrey Aurigemma Vice Vice President - Northstar Affiliated
President - Investment Companies.
Investments
Michael Graves Vice Vice President - Northstar Affiliated
President Investment Companies
Investments
Agnes Mullady Sr. Vice Vice President & Treasurer of Northstar
President Affiliates and the Northstar Affiliated
and CFO Investment Companies.
Lisa M. Hurley Sr. Vice Executive Vice President, Northstar
President Administrators Corp., Vice President
General Counsel Northstar Distributors and Northstar
& Secretary Affiliated Investment Companies.
Gertrude Purus Vice Vice President Northstar Distributors and
President Northstar Administrators Corp.
Operations
Stephen Vondrak Vice Vice President - Northstar Distributors,
President Inc., Former Regional Marketing
Sales/Marketing Manager with Roger Engemann
and Associates from 1991-1994.
Mark Sfarra Vice Vice President - Northstar Distributors,
President - Inc.
Marketing
ITEM 29 . PRINCIPAL UNDERWRITER
(a) See "Management of the Funds - The Adviser and Affiliated Service Providers"
and "How to Purchase Shares" in the Prospectus and "Underwriter and Distribution
Services" in the Statement of Additional Information, both of which are included
in this Post-Effective Amendment to the Registration Statement. Unless
otherwise indicated, the principal business address for each person is c/o
Northstar, Two Pickwick Plaza, Greenwich, CT 06830.
<PAGE>
(b) (1) (2) (3)
Name and Principal Position and Offices Position and Offices
Address with Underwriter with Registrant
- ------------------ -------------------- --------------------
John Turner Director Trustee, Chairman
20 Washington Ave. South
Minneapolis, MN
John Flittie Director None
20 Washington Ave. South
Minneapolis, MN
Mark L. Lipson Chairman & Director Trustee and President
Robert J. Adler President None
Mark Blinder Reg. Vice President None
Richard Frances Reg. Vice President None
Daniel Leonard Reg. Vice President None
Stephen O'Brien Reg. Vice President None
David Linton Reg. Vice President None
Charles Dolce Reg. Vice President None
Hyman Glasman Reg. Vice President None
Stephen Vondrak Vice President None
Mark Sfarra Vice President None
Gertrude Purus Vice President None
Agnes Mullady Vice President Vice President
& Treasurer & Treasurer
Lisa Hurley Vice President Vice President
& Secretary & Secretary
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Custodial Trust Company acts as Custodian and maintains the following records at
its principal office at 101 Carnegie Center, Princeton, New Jersey 08540-6231
for the Northstar Advantage
<PAGE>
Trust, and State Street Bank and Trust Co. maintains such records as Custodian
and Fund Accounting Agent for the Government Securities, High Yield, Strategic
Income, Income, Growth, and Special Funds:
(1) Receipts and delivery of securities including certificate numbers;
(2) Receipts and disbursement of cash;
(3) Records of securities in transfer, securities in physical possession,
securities owned and securities loaned.
(4) Fund Accounting Records.
First Data Investor Services Group, ("First Data") maintains the following
records at One Exchange Place, 11th Floor, Boston, Massachusetts, 02109, as
Transfer Agent and Blue Sky Administrator for the Funds; and Fund Accounting
Agent for the Northstar Advantage Trust.
(1) Shareholder Records;
(2) Share accumulation accounts: Details as to dates and number of shares
of each accumulation, price of each accumulation.
(3) Fund Accounting Records
(4) State Securities Regisitration Records
All other records required by item 30(a) are maintained at the office of the
Administrator, Two Pickwick Plaza, Greenwich, CT 06830.
ITEM 31. Management Services
Not Applicable
ITEM 32. Undertakings
(a) Registrant hereby undertakes to call a meeting of shareholders for the
purpose of voting upon the question of removal of a Trustee or Trustees when
requested in writing to do so by the holders of at least 10% of the Trusts'
outstanding shares of beneficial interest and in connection with such meeting to
comply with the provisions of Section 16(c) of the Investment Company Act of
1940 relating to shareholder communications.
(b) Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to shareholders, upon
request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certified that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933, and the Registrant has duly caused
this Post-Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Town of Greenwich
and the State of Connecticut on the 27th day of February, 1996.
REGISTRANT
By: MARK L. LIPSON
------------------------------
Mark L. Lipson, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
SIGNATURES TITLE DATE
JOHN G. TURNER Chairman and February 27, 1996
John G. Turner* Trustee
MARK L. LIPSON Trustee February 27, 1996
Mark L. Lipson*
JOHN R. SMITH Trustee February 27, 1996
John R. Smith*
PAUL S. DOHERTY Trustee February 27, 1996
Paul S. Doherty*
DAVID W. WALLACE Trustee February 27, 1996
David W. Wallace*
ROBERT B. GOODE, JR. Trustee February 27, 1996
Robert B. Goode, Jr.*
ALAN L. GOSULE Trustee February 27, 1996
Alan L. Gosule*
DAVID W.C. PUTNAM Trustee February 27, 1996
David W.C. Putnam*
WALTER H. MAY, JR. Trustee February 27, 1996
Walter H. May, Jr.**
<PAGE>
SIGNATURES TITLE DATE
AGNES MULLADY Principal Financial February 27, 1996
Agnes Mullady and Accounting
Officer
By: LISA HURLEY*
Lisa Hurley
Attorney-in-fact
* Executed pursuant to powers of attorney filed with PEA No. 6 (Northstar
Advantage Trust and Northstar Advantage Strategic Income Fund), PEA No.10
(Northstar Advantage High Yield Fund), PEA No. 15 (Northstar Advantage
Government Securities Fund), and PEA No. 14 (Northstar Advantage Income Fund,
Northstar Advantage Special Fund and Northstar Advantage Growth Fund).
** Executed pursuant to a power of attorney filed herewith.
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit No. Under
Part C of Form N-1A Name of Exhibit Page Number Herein
------------------- --------------- ------------------
Exhibit 9(d) Administration Agreement
Exhibit 10 Opinion of Counsel
Exhibit 11 Consent of Independent Public
Accountants
Exhibit 12 Annual Report to Shareholders
Exhibit 16 Performance Information
Exhibit 17 Power of Attorney
Exhibit 27 Financial Data Schedule (EX-27)
<PAGE>
ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT is made as of April 3, 1995, by and between
THE SHAREHOLDER SERVICES GROUP, INC. a Massachusetts corporation ("TSSG"), and
the Trusts or Series of Trusts named in Annex 1 hereto, each a Massachusetts
business trust (the "Funds").
WHEREAS, each Fund is registered as a diversified, open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, each Fund desires to retain TSSG to render certain administrative
services to the Fund and TSSG is willing to render such services;
WITNESSETH:
NOW, THEREFORE, in consideration of the premises and mutual convenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Funds hereby appoints TSSG to act as Administrator of
the Funds on the terms set forth in this Agreement. TSSG accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. DELIVERY OF DOCUMENTS. The Funds have furnished or shall furnish to TSSG
upon request copies properly certified or authenticated of each of the
following:
(a) Resolutions of each Fund's Trustees authorizing the appointment of
TSSG to provide certain administrative services to the Fund and approving this
Agreement;
(b) Each Fund's Declaration of Trust filed with the Massachusetts
Secretary of State and all amendments thereto (the "Declaration");
(c) Each Fund's By-Laws and all amendments thereto (the "By-Laws");
(d) The Investment Advisory Agreement between Northstar Investment
Management Corp. (the "Adviser") and the Funds (the "Advisory Agreements");
(e) The Custody Agreements between the Custodian for each Fund (the
"Custodian") and each of the Funds (the "Custody Agreements");
(f) The Transfer Agency and Registrar Agreement between The Shareholder
Services Group, Inc. (the "Transfer Agent") and the Funds dated as of December
6, 1994, as amended;
<PAGE>
(g) Each Fund's Registration Statement on Form N1-A (the "Registration
Statement") under the Securities Act of 1933 and under the 1940 Act, and all
amendments thereto; and
(h) The Exemptive Order pursuant to which the Funds offer multiple classes
of shares and the accounting procedures utilized in connection with the multiple
class arrangement; and
(i) Each Fund's most recent prospectus (the "Prospectus").
Each Fund will furnish TSSG from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing. Furthermore, each Fund will provide TSSG with any other documents
that TSSG may reasonably request and will notify TSSG as soon as possible of any
matter materially affecting the performance of TSSG of its services under this
Agreement.
3. DUTIES AS ADMINISTRATOR. Subject to the supervision and direction of
the Trustees of each Fund, TSSG, as Administrator, will assist in supervising
various aspects of the Fund's administrative operations and undertakes to
perform the following specific services:
A. FUND ACCOUNTING
(a) Accounting and bookkeeping services for each class of shares of each
Fund (including the maintenance of such accounts, books and records of each Fund
as may be required by Section 3l(a) of the 1940 Act and the rules thereunder),
as more fully set forth in the description of TSSG's services contained in
Schedule A to this Agreement;
(b) Valuing each Fund's assets and calculating the net asset value of the
shares of the Fund at the close of trading on the New York Stock Exchange in
accordance with the Prospectus and the multiple class accounting procedures, as
more fully set forth in the description of TSSG's services contained in Schedule
A to this Agreement, or if standard valuation procedures cannot be executed,
TSSG shall give prompt notification thereof to the affected Fund and such
securities shall be valued in accordance with the internal procedures approved
by the Trustees of such Fund;
(c) Reconciling, on a daily basis, the accounting records of the Funds
against the records of the Funds maintained and provided by the Funds' Transfer
Agent, and reconciling, on a monthly basis, the accounting records of the Funds
against the records of the Funds maintained and provided by the Funds'
Custodian.
(d) Maintaining office facilities (which may be in the offices of TSSG or
a corporate affiliates) for purposes of providing the services described above,
and
(e) Furnishing statistical and research data, data processing services,
clerical services, and internal legal, executive and administrative services and
stationery and office supplies in connection with the services described above.
2
<PAGE>
B. BLUE SKY
(a) Effecting and maintaining (through the daily monitoring of sales of
shares of each Fund), as the case may be, the registration or qualification of
shares of the Fund for sale under the securities laws of all fifty states and
such other jurisdictions indicated for each Fund from time to time;
(b) Filing with each appropriate jurisdiction the appropriate materials
relating to each Fund, such filings to be made promptly after receiving such
materials from the Fund, including Post-Effective Amendments to the Fund's
Registration Statement; Annual and Semi-Annual Reports to Shareholders, Notices
pursuant to Rule 24f-2 under the 1940 Act; definitive copies of the Fund's
Prospectus and Statement of Additional Information and any Supplements thereto;
Amendments to the Declaration of Trust, By-Laws, or Distribution Agreement; and
Notices of Annual or Special Meetings of Shareholders and related Proxy
materials which propose the merger, reorganization or liquidation of a Fund;
(c) Conveying to each Fund any comments received on such filings and, if
desired by the Fund, responding to such comments in such manner as authorized by
the Fund; and
(d) In connection with the foregoing, providing the services of certain
persons who may be appointed as officers of the Fund by the Fund's Board of
Trustees.
(e) Remittance to the respective jurisdictions of registration fees for
the shares of any Fund, and of any fees for qualifying or continuing the
qualification of any Fund. TSSG may request the funds necessary for the payment
of fees in advance of the date when the fees become due, or may advance such
amounts on behalf of the Fund and invoice the Fund for such out-of-pocket
expenses.
C. OTHER SERVICES
In addition to the foregoing and at the request of each Fund for such additional
consideration as the parties shall agree, TSSG may also under render the
following services:
(a) Accumulating information for and, subject to approval by the Fund's
Treasurer, preparing reports to the Fund's shareholders of record and the SEC
including, but not necessarily limited to, Annual Reports and Semi-Annual
Reports on Form N-SAR;
(b) Preparing and furnishing the Fund with performance information
(including yield and total return information) calculated in accordance with
applicable U.S. securities laws and reporting to external databases such
information as may reasonably be requested.
In performing all services under this Agreement, TSSG shall act in
conformity with the Fund's Articles and By-Laws, the 1940 Act, and the
Investment Advisers Act of 1940, as the same may be amended from time to time;
and the investment objective, investment policies and
3
<PAGE>
other practices and policies set forth in the Fund's Registration Statement, as
such Registration Statement and practices and policies may be amended from time
to time.
4. ALLOCATION OF EXPENSES. TSSG shall bear all expenses in connection
with the performance of its services under this Agreement except as otherwise
specially provided herein.
(a) TSSG will from time to time employ or associate with itself such
person or persons as TSSG may believe to be particularly suited to assist it in
performing services under this Agreement. Such person or persons may be officers
and employees who are employed by both TSSG and one or more Funds. The
compensation of such person or persons shall be paid by TSSG and no obligation
shall be incurred on behalf of any Fund in such respect.
(b) TSSG shall not be required to pay any of the following expenses
incurred by the Fund: taxes and fees payable to Federal, state and other
governmental agencies; outside auditing expenses; outside legal expenses; or
other expenses not specified in this Section 4 which may be properly payable by
any Fund.
(c) For the services to be rendered, the facilities to be furnished and
the payments to be made by TSSG, as provided for in this Agreement, each Fund
will pay TSSG monthly the fees set forth in Schedule B to this Agreement. Upon
any termination of this Agreement before the end of any month, the fee for such
part of a month shall be prorated according to the proportion which such period
bears to the full monthly period and shall be payable upon the date of
termination of this Agreement. For the purpose of determining fees payable to
TSSG, the value of each Fund's net assets shall be computed at the times and in
the manner specified in each Fund's Registration Statement.
(d) TSSG will bill the Funds as soon as possible after the end of each
calendar month, and said billings will be detailed in accordance with the
out-of-pocket schedule. The Fund will promptly pay to TSSG the amount of such
billing.
5. LIMITATION OF LIABILITY. TSSG shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Funds in connection
with the performance of its obligations and duties under this Agreement, except
a loss resulting from TSSG's willful misfeasance, bad faith or gross negligence
in the performance of such obligations and duties, or by reason of its reckless
disregard thereof. The Funds will indemnify TSSG against and hold it harmless
from any and all losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from any claim, demand, action
or suit not resulting from the willful misfeasance, bad faith or gross
negligence of TSSG in the performance of such obligations and duties or by
reason of its reckless disregard thereof.
6. TERMINATION OF AGREEMENT.
(a) This Agreement shall be effective on the date first written above and
shall continue for one (l) year (the "Initial Term"), unless earlier terminated
pursuant to the terms of this
4
<PAGE>
Agreement. Thereafter, this Agreement shall automatically be renewed for
successive one year term ("Renewal Term").
(b) Either party may terminate this Agreement at the end of the Initial
Term or at the end of any subsequent Renewal Term upon not less than ninety (90)
days or more than one hundred-eighty (180) days prior written notice to the
other party.
(c) In the event a termination notice is given by any Fund, all expenses
associated with movement of records and materials and conversion thereof will be
borne by the Fund.
(d) If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party. If TSSG is the Non-Defaulting Party, its termination of
this Agreement shall not constitute a waiver of any other rights or remedies of
TSSG with respect to services performed prior to such termination of rights of
TSSG to be reimbursed for out-of-pocket expenses. In all cases, termination by
the Non-Defaulting Party shall not constitute a waiver by the Non-Defaulting
Party of any other rights it might have under this Agreement or otherwise
against the Defaulting Party.
7. AMENDMENT TO THIS AGREEMENT. No provision of this Agreement may be
changed, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, discharge or
termination is sought.
8. MISCELLANEOUS.
(a) Any notice or other instrument authorized or required by this
Agreement to be given in writing to any Fund or TSSG shall be sufficiently given
if addressed to the party and received by it at its office set forth below or at
such other place as it may from time to time designate in writing.
To the Funds:
c/o Northstar Administrators
Two Pickwick Plaza
Greenwich, Connecticut 06830
To TSSG:
The Shareholder Services Group, Inc.
Exchange Place - 025-004B
Boston, Massachusetts 02109
Attn: Patricia L. Bickimer, Esq.
5
<PAGE>
(b) This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable without the written consent of the other
party.
(c) This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts.
(d) This Agreement may be executed in any number of counterparts each of
which shall be deemed to be an original and which collectively shall be deemed
to constitute only one instrument.
(e) The captions of this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
9. CONFIDENTIALITY. All books, records, information and data pertaining
to the business of the Fund that are exchanged or received pursuant to the
performance of TSSG's duties under this Agreement shall remain confidential and
shall not be voluntarily disclosed to any other person, except as specifically
authorized by any Fund or as may be required by law.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed and delivered by their duly authorized officers as of the date,
first written above.
THE SHAREHOLDER SERVICES GROUP. INC.
By:
--------------------------------------------
Name: Richard W. Ingram
Title: Vice President and Division Manager
NWNL NORTHSTAR SERIES TRUST
By:
--------------------------------------------
Name:
Title: Sr. Vice President
6
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
NORTHSTAR ADVANTAGE HIGH YIELD FUND
By:
---------------------------------------------
Name and Title
NORTHSTAR ADVANTAGE INCOME FUND
By:
---------------------------------------------
Name and Title
NORTHSTAR ADVANTAGE GROWTH FUND
By:
---------------------------------------------
Name and Title
NORTHSTAR ADVANTAGE SPECIAL
By:
---------------------------------------------
Name and Title
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
By:
---------------------------------------------
Name and Title
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
By:
---------------------------------------------
Name and Title
7
<PAGE>
ANNEX 1
NORTHSTAR SERIES TRUST
(To Be Renamed Northstar Advantage Trust)
NWNL NORTHSTAR HIGH YIELD BOND FUND
(To Be Renamed Northstar Advantage High Total Return Fund)
NWNL NORTHSTAR INCOME AND GROWTH FUND
(To Be Renamed Northstar Advantage Income and Growth Fund)
NWNL NORTHSTAR MULTI-SECTOR BOND FUND
(To Be Renamed Northstar Advantage Multi-Sector Bond Fund)
* NORTHSTAR ADVANTAGE HIGH YIELD FUND
* NORTHSTAR ADVANTAGE INCOME FUND
* NORTHSTAR ADVANTAGE GROWTH FUND
* NORTHSTAR ADVANTAGE SPECIAL FUND
* NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
* NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
* BLUE SKY SERVICES ONLY.
8
<PAGE>
SCHEDULE A
FUND ACCOUNTING SERVICES
These services include:
- Portfolio and General Ledger Accounting
- Daily Pricing
- Daily Multiple Classes of Shares Valuation and NAV Calculation
- Client Reporting
PORTFOLIO AND GENERAL LEDGER ACCOUNTING
The Shareholder Services Group performs Portfolio and General ledger Accounting
in accordance with Section 31 of the Investment Company Act of 1940. Our
PC-based mutual fund accounting system was created to provide real-time,
on-line, multi-currency, multi-class accounting and reporting. The system is a
personal computer-based, networked system, which:
- Processes multi-currency transactions with real-time general ledger
posting and on-line inquiry;
- Contains shared master files, exchange rate files and security price
files;
- Provides on-line, real-time valuation including the calculation of Net
Asset Values;
- Is designed for flexibility to handle new security types and
regulatory changes;
- Provides functionality for capital stock, expenses, distributions and
NAV calculations at the class level.
The fund accounting process meets all current regulatory, tax and financial
statement reporting requirements and was designed with the flexibility to handle
new security types and regulatory changes. Each transaction type utilizes
standardized posting rules and controls to ensure accuracy. Our multi-currency
tax lot accounting process allows clients to use FIFO, LIFO or Specific Lot
Costing method when using tax lot basis accounting.
The system offers multi-currency reports that calculate the costs in local and
base. The system is able to produce Portfolio, Trade, Foreign Exchange,
Valuation, General Ledger and other specialized reports and inquiry screens.
This flexibility is passed along to our clients in that we are able to work with
them to create all required reports.
DAILY PRICING
Mutual Fund pricing is processed on a daily basis. Market prices are received
from our vendors and are input to the database via automated feed, thereby
enhancing the accuracy of input of market quotations to the fund's portfolio.
All prices are verified by reviewing up-to-the-minute news stories and the
latest corporate action notifications. Additionally, all price changes are
compared to market indices for reasonableness. Once prices are verified, they
are released from the database to the fund for valuation by the Fund
Accountants.
Security price quotations are supplied electronically by the following
commercial vendors to The Shareholder Services Group:
Interactive Data Corporation Reuters
Merrill Lynch Standard & Poor's
Muller Data Corporation Telerate
Quotron
1
<PAGE>
The Fund Accounting system supports an Account Master File that contains source
identifiers. These identifiers are used to define the selected pricing vendor,
as well as the pricing preferences for each portfolio.
DAILY VALUATION AND N.A.V. CALCULATION
Fund Net Assets, including portfolio holdings, currency, receivables and
payables for investments, receivables and payables for foreign exchange
contracts and income receivables are valued daily by the Fund Accounting group.
The valuation and calculation of the Net Asset Value of each fund undergoes
multiple reviews by the Fund Accountant, Senior Fund Accountant and Unit
Manager. Standard Quality Control and Proof procedures are performed daily at
the fund level before Net Asset Values are released to NASDAQ and/or the
Transfer Agent. Net Asset Values are reported to NASDAQ by 5:40 p.m. EST and to
the fund's transfer agent by 6:00 p.m. EST.
CLIENT REPORTING
Fund Accounting reports cash availability, trade status and corporate actions
information to the client. The standard report package includes, but is not
limited to:
- Portfolio and Currency Valuation
- Daily Trial Balance
- Pending Settlement Reports
- Interest Journal
- Amortization/Accretion Journal
- Daily Transaction Reports
- Working Appraisal
- Interest and Dividend Receivable Reports
CLIENT REPORTING (CONTINUED)
All accounting reports include both base and local currency. Comprehensive
reporting is available on Portfolio Activity, Currency Transactions, Accrued
Income, Broker Commissions, Currency Gain and Loss and Subscriptions and
Redemptions.
CUSTOMIZED REPORTING IS DEVELOPED TO ACCOMMODATE YOUR SPECIFIC NEEDS. We are
committed to providing flexible reporting systems that enable us to accommodate
special requests. Recent changes, as a result of client requests, have included
various reports on Government Bond funds by issuer and coupon, interest
summarization, modified pricing reports and wash sale analysis reports.
We have also developed Tax-Exempt Income Reporting, which enables our clients to
receive a variety of data on tax-exempt securities including daily rate changes,
pay frequencies, accrual periods, verification of interest bought/sold and the
identification of due bill requirements. Like our standard report package, all
customized reports may be delivered via hard copy or electronic transmission.
QUALITY ASSURANCE PROCEDURES
The source of quality service to our clients is based upon efficient and
effective system processing and detailed control procedures to ensure
completeness and accuracy of accounting transactions and valuations. Our
Standardized Daily Workflow and Proof Package, Monthly Management Report and
Daily Standard Control Procedures are used to provide consistent and accurate
service.
FUND ACCOUNTING: STANDARDIZED DAILY WORKFLOW
The following Daily Workflow depicts the basic operations performed by Fund
Accounting each day. This standardization of tasks provides control and ensures
accuracy and efficiency.
2
<PAGE>
TIME TASK DESCRIPTION
- ---- ---- -----------
9:00-9:30 Cash Reconciliation Reconcile prior day ending
cash balance per Custodian's
records and the Accounting
System to the prior day ending
cash balance, per the reported
Cash Availability.
9:30-10:00 Cash Availability Combine all activity affecting
the fund's cash account and
produce a net cash amount
available for investment.
Communicate investable cash to
the Advisor.
9:00-12:30 Foreign Currency Settlements Foreign currency balances are
reconciled daily between the
custody system and the Fund
Accounting Currency Balances.
9:30-10:30 Capital Stock Entry Verify daily transactions from
the Transfer Agent. Input
transactions to the Fund
Accounting System.
10:30-11:00 Expense Accruals Standard daily expense
accruals are calculated by the
Fund Accounting System and
verified by the Fund
Accountant.
11:00-3:30 Trade Entry Upon receipt of instructions
from the Investment Advisor,
the Fund Accountant reviews,
records and transmits buys,
sells and Foreign Exchange
Contracts to the Custodian.
1:30-2:00 Income and Corporate Actions Upon availability of the
current day's Foreign Exchange
Rates, the Fund Accountant can
run the income and corporate
actions process via the Fund
Accounting System.
2:00-5:00 Valuation As Portfolio prices are
released to the Fund
Accounting System, the Fund
Accountant runs the Valuation
process and completes reviews
of market Prices.
2:00-5:35 Report Production The Fund Accountant generates
daily reports needed to review
and confirm the system
generated NAV Calculation.
3:30-5 40 Managerial Review The Unit Manager reviews the
daily control package
completed by the Fund
Accountant. Throughout the day
the Senior Fund Accountant has
also reviewed the package and
monitored the status of the
Fund.
The Unit Manager verifies the
changes in market value to the
various market indexes.
3
<PAGE>
Using the Trial Balance, the
Unit Manager identifies and
verifies the impact of current
day fund activity on a per
share basis.
5:40-6:00 Fund End of Day Upon verification of the NAV
calculation, the Unit Manager
runs the Fund End of Day
processing in which the Fund
Accounting System checks that
Valuation has been run and
Capital Stock Activity has
been recorded for the day.
This process makes all
temporary postings permanent.
QUALITY ASSURANCE PROCEDURES (CONTINUED)
Our Standardized Daily Proof package covers all Balance Sheet and Capital
Accounts. Fund Accountants are required to complete the package daily for
managerial review.
DAILY STANDARD CONTROL PROCEDURES
The procedures are used to ensure the integrity of the Security Master File, to
verify the accuracy in processing Corporate Actions and to ensure that the Daily
Proof package and managerial review of the Net Asset Value calculation is
performed, documented and communicated.
MONTHLY MANAGEMENT REPORT
Client managers provide you with the flexibility for implementing individually
tailored reporting and for monitoring the resolution of your inquiries. Each
client receives a monthly management report for their funds containing:
- An Executive Summary of the month's activity
- Statistical reporting related to NAV, subscription and redemption
activity, trade settlements, distributions, compliance, past-due
income and cash availability
- Key dates, such as ex-dividend dates and Client deliverables, such as
report delivery, planned conference calls and audit timelines.
- Project update relating to the status of client inquiries and
requests.
- A contact list of managers and fund accountants assigned to your
portfolios.
4
<PAGE>
SCHEDULE B
FEE SCHEDULE FOR
ADMINISTRATIVE SERVICES
A. FUND ACCOUNTING SERVICES
<TABLE>
<CAPTION>
<S> <C>
Portfolio and General Ledger Accounting Daily, Monthly, and Year-to-Date Reporting
Daily Pricing of all Securities Daily Reporting of Choice One Data
Daily Valuation and N.A.V. Calculation
</TABLE>
I. CHARGES/OUT OF POCKET EXPENSES
First $750 Million of net assets 8 Basis Points
Next $1.25 Billion of net assets 6 Basis Points
Excess of $2 Billion of net assets 4 Basis Points
All reasonable Out-of-Pocket expenses to include, but not limited to, such items
as telephone, wire charges, courier services, etc. Because most securities are
held by more than one client pricing charges are passed through to our clients
on a prorated basis.
B. BLUE SKY
- Electronically receiving shares sold by state by fund on a daily basis
from the transfer agent.
- Monitoring daily the shares sold versus shares registered for each
fund in each state to insure the fund does not sell more than they are
registered for and thus incur state fines.
- Filing annual registration renewals for each fund in each state.
- Filing post effective amendments to SEC filings and other required
fund documents with the states.
- Passing on inquiries and correspondence related to filings from the
states to clients and assisting with responses to the states.
- Initial filings for new funds with the states.
- Working with each state's Blue Sky Staff to resolve issues and
streamline the funds registration process.
I FEES/OUT-OF-POCKET EXPENSES:
Per Portfolio, Per Class, Per Annum $5,000 flat fee
Fee for Classes A, B and C $2,000
Fee for Class T $l,000
Data Transmission charges, initial transfer, agent hookup charges,
Federal Express, mail and delivery charges.
5
<PAGE>
C. OTHER SERVICES
FINANCIAL AND PERFORMANCE REPORTING:
- Coordinate Financial Statement Preparation (annuals, semi-annuals,
etc.) from drafts to finished reports
- Copy and distribute shareholder report drafts
- N-SAR Reporting
- Provide fund performance statistics including: Total Return, SEC
Yield, Dividend Summary, and Quarter End Reports on fund services to
client's advisory and marketing departments, database service firms,
and general media.
- Initial set-up of new funds with database service companies.
FEES/OUT-OF-POCKET EXPENSES:
Per Portfolio, Per Annum To Be Negotiated
All reasonable out of pocket expenses.
6
<PAGE>
NORTHSTAR INVESTMENT MANAGEMENT CORP.
TWO PICKWICK PLAZA
GREENWICH, CT 06830
February 15, 1996
Northstar Advantage Government Securities Fund
Two Pickwick Plaza
Greenwich, CT 06830
Gentleman:
I am furnishing the following opinion in connection with the filing of a notice
(the "Notice") under Rule 24f-2 for the Northstar Advantage Government
Securities Fund (the "Fund"). This opinion is being furnished in my capacity
as counsel for Northstar Investment Management Corporation and Northstar
Administrators, investment adviser and administrator, respectively, for the
Fund.
I have reviewed the Declaration of Trust of the Fund, a Massachusetts business
trust, and such other documents and such questions of law as I have deemed
necessary or advisable.
On the basis of such review, it is my opinion that when the shares of beneficial
interest of the Fund referred to in the Notice were sold during the period
commencing January 1, 1995 and ending December 31, 1995, in reliance upon
registration pursuant to Rule 24f-2 and in accordance with the currently
effective prospectus of the Fund, such shares were legally issued, fully paid
and nonassessable.
Very truly yours,
/s/ LISA HURLEY
Lisa Hurley
General Counsel
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
-----------------------
We consent to the incorporation by reference in Post-Effective Amendment No. 17
to the Registration Statement of Northstar Advantage Government Securities Fund
on Form N-1A of our report dated February 15, 1996 on our audit of the financial
statements and financial highlights of Northstar Advantage Government Securities
Fund which report is included in its Annual Report to Shareholders which is also
incorporated by reference in this Post-Effective Amendment to the Registration
Statement. We also consent to the references to our Firm in the Prospectus
under the caption "Financial Highlights" and in the Statement of Additional
Information under the captions "Independent Accountants" and "Financial
Statements."
COOPERS & LYBRAND L.L.P.
New York, New York
February 26, 1996
<PAGE>
[LOGO]
NORTHSTAR
ADVANTAGE FUNDS
ANNUAL REPORT TO SHAREHOLDERS
DECEMBER 31, 1995
[LOGO]
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
ANNUAL REPORT,
DECEMBER 31, 1995
Dear Shareholders:
We are pleased to provide you with the annual report of the Northstar Advantage
Funds for the year ended December 31, 1995. We are gratified with your decision
to entrust your assets to the Northstar Advantage Funds and are confident that
we can assist you in reaching your financial objectives. Our goal is to provide
you with long term, consistent and superior long term investment results through
fundamental research, analysis, and traditional investment disciplines.
Following this letter is a summary of the results of each Fund by its respective
portfolio manager. We hope you will find it informative.
During 1995, many favorable changes occurred which benefited the stock and
bond markets. Investors began the year with substantial fears of further large
increases in interest rates driven by rising inflation and an overheated
economy. These fears were quickly proven to be incorrect. Although the Federal
Reserve Board did raise short term interest rates slightly on February 1st, that
proved to be the last in a series of Fed tightening moves. Economic growth in
the U.S. slowed to a moderate 2 1/2% rate, and long term interest rates fell
sharply from over 8% last winter to just over 6% currently.
The result of the "soft landing" or moderate growth/moderate inflation
strategy by the Fed produced a solid rise in bond prices of about 17% or more
and a sharp rise in the major stock market indices of over 33.4% for the twelve
months ended 12/31/95. Stock prices again were supported by excellent gains in
corporate profits even as economic growth slowed somewhat. The efficiency,
productivity, and world class competitiveness of so many U.S. companies is
finally being recognized by investors despite so many "experts" who had forecast
recession, high inflation and a decline in corporate profits.
Our outlook for both the bond and stock markets in 1996 remains favorable.
Government bond prices have improved strongly while other segments, especially
high yield bonds, continue to perform well. Stock markets have remained
favorable during the fall. In coming months we expect the President and Congress
to hammer out a long term budget which will reduce sharply the federal deficit.
We also expect the Fed to follow with another interest rate cut. Based on these
actions and continued low inflation, we believe that both stock and bond markets
should produce positive returns in 1996.
We note with great conviction that attempts to "time" the market often prove
counterproductive. Investors are strongly urged to focus on the long term.
Consistent disciplined investing is the proven method of achieving attractive
returns and meeting your financial objectives. We continue to support this
philosophy and look forward to serving your investment needs in the future.
Sincerely,
[SIG]
Mark Lipson
President
January 31, 1996
<PAGE>
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
- Performance figures are historical and reflect reinvestment of all
distributions and changes in net asset value. Unless otherwise indicated,
the Fund's performance is computed without a sales charge. When sales
charges are included, Fund performance reflects the maximum sales charge
for each class of shares.
- Class T shares of each Fund represent the largest asset class of each
Fund. Class T shares are no longer available for purchase by new investors
and may be purchased only under limited circumstances by existing Class T
shareholders. Since June 5, 1995, each Fund began offering three new
classes of shares (Class A, B, and C), each representing a unique pricing
structure for purchasing shares of the Funds. Performance information
relating to each Class of shares of each Fund is contained in the
performance graph for each Fund.
- Each Fund's investment return and principal value will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.
- Each Fund's portfolio composition may change and there is no assurance the
Fund will continue to hold any particular securities.
- Past performance is not indicative of future results.
ABOUT INDICES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
- Standard & Poor's Corporation (S&P) is a credit-rating agency. The
unmanaged Standard & Poor's Composite Index of 500 Stocks is widely
regarded by investors as representative of the stock market in general.
- The CPI is an index of the prices paid by consumers for consumer goods and
services. The index is prepared by the Bureau of Labor Statistics. The
index is widely regarded by investors as the key measure of inflation in
the U.S. economy.
- The unmanaged Russell 2000 Index is generally representative of the
performance of the stocks of small-capitalization companies.
- Lehman Brothers Inc. is the principal subsidiary of publicly-held Lehman
Brothers Holdings, Inc. It is engaged principally in raising and managing
funds in capital markets worldwide. Lehman Brothers indices measure the
performance of fixed income securities over various time periods and in
various groupings. The indices are unmanaged, but exclude small, illiquid
and/or esoteric bonds from the indices. We believe that about two-thirds
of fixed income index users rely on one or more of Lehman Brothers Fixed
Income Indices.
- An investment cannot be made in any indices listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
<PAGE>
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
[PHOTO][LOGO]
MARGARET D. PATEL
INVESTMENT ENVIRONMENT
THE MARKETS
- Slow economic growth, subdued inflation, strong foreign purchases of
governments, and optimism over an accord to reach a balanced federal
budget caused long term interest rates to decline in the quarter.
Treasury bonds due in 30 years dropped from 7.87% at the end of
December, 1994, to 5.94% at year-end 1995. The overnight Federal
Funds rate declined from approximately 6.00% to 5.50% over the same
period.
- The economy is likely to continue to grow at moderate rates of 2.5%
or less over the next few quarters, with inflation remaining at
today's low levels around 2 1/2% to 2 3/4%.
- The Federal Reserve may well make further modest cuts in the Fed
Funds rate over the next few months, if it appears that economic
growth may slip below the current low rate of expansion.
THE FUND
- In the year ended December 31, 1995 the Fund (T shares) rose 22.90%,
versus an increase of 17.34% for the average fund in the Lipper
general U.S. government fund category. The Fund benefited from its
longer than average maturity, which caused prices of bonds held in
the Fund to rise more than those held in the average portfolio as
interest rates dropped over the last three months.
- During the year's first half, the Fund first increased its holdings
of long duration zero coupon Treasuries and agencies, and reduced its
premium coupon GNMA holdings. In 1995's final quarter, the Fund
reduced its long duration issues, and reinvested the proceeds in
slight discount GNMA 6.5% issues, resulting in the percentage of
mortgage securities rising from 54.1% at 9/30/95 of the portfolio to
72.7% at year end.
- Because of the substantial price outperformance of the strips versus
mortgages, the Fund was able to slightly increase the yield of the
Fund through these transactions. Intermediate term securities, such
as GNMAs, represent attractive investment value now because their
yields are very close to those of long maturity issues.
CURRENT STRATEGY
- We expect long term interest rates to stay around current levels, or
possibly to decline somewhat if the economy continues to grow at a
subdued level with inflation in check. Since it is likely that any
further rate declines may not be as large as those of 1995 (when long
term government yields dropped from 7.87% to 5.94% during the year),
we expect to maintain the focus of the portfolio. Holdings of longer
term zero coupon bonds whose prices are extremely sensitive to small
changes in interest rates have been reduced, while those of GNMA
securities which we feel represent attractive investment value, have
been increased.
---------------------------------------------------------------------------
FUND INFORMATION (ALL DATA IS AS OF 12/31/95)
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
LARGEST HOLDINGS (BY PERCENT OF TOTAL ASSETS)
<S> <C> <C> <C>
NAME % FUND
1. GNMA 7.0% 7/15/24 44.6%
2 GNMA 6.5% 22.4
3. FNMA 0% 10/09/19 14.2
4. FHLM 0% 11/29/19 12.4
5. GNMA 7.5% 4/15/23-7/15/24 5.8
---
99.4%
<CAPTION>
SECTOR ALLOCATION
NAME % FUND
<S> <C> <C> <C>
GNMAs 72.8%
US Agencies 26.6
</TABLE>
1
<PAGE>
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NORTHSTAR
ADVANTAGE
GOVERNMENT SECURITIES FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH
CLASS OF SHARES THROUGH THE FUND'S FISCAL YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended December
31, 1995, with all distributions reinvested in shares. The average annualized
total return for Class A shares of 9.07% for the period since the classes'
inception on June 5, 1995 reflects payment of the maximum sales charge of 4.75%.
Average annualized total returns of 8.63% and 16.01% since inception on June 5,
1995 for Class B and Class C shares, respectively, and total annual returns
since inception on February 3, 1986 for Class T shares of 7.96%, reflect
applicable contingent deferred sales charges (maximum contingent deferred sales
charge for Class B of 5.00% declines to 0% and Class T shares of 4.00% declines
to 0% after five years; and maximum charge for Class C shares is 1.00% during
the first year of investment only). All performance data shown represents past
performance, and should not be considered indicative of future performance.
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND -- CLASS A
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND -- CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
CLASS A LEHMAN INT GOV'T CPI
6/5/95 9,525 10,000 10,000
6/30/95 9,450 10,064 10,010
7/31/95 9,672 10,069 10,030
8/31/95 9,684 10,152 10,040
9/30/95 9,764 10,220 10,050
10/31/95 9,777 10,332 10,080
11/30/95 9,801 10,458 10,080
12/31/95 9,918 10,562 10,080
CLASS B LEHMAN INT GOV'T CPI
6/5/95 10,000 10,000 10,000
6/30/95 9,338 10,064 10,010
7/31/95 9,166 10,069 10,030
8/31/95 9,430 10,152 10,040
9/30/95 9,643 10,220 10,050
10/31/95 9,990 10,332 10,080
11/30/95 10,204 10,458 10,080
12/31/95 10,483 10,562 10,080
</TABLE>
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND -- CLASS C
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND -- CLASS T
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
CLASS C LEHMAN INT GOV'T CPI
6/05/95 10,000 10,000 10,000
6/30/95 9,729 10,064 10,010
7/31/95 9,548 10,069 10,030
8/31/95 9,820 10,152 10,040
9/30/95 10,040 10,220 10,050
10/31/95 10,390 10,332 10,080
11/30/95 10,593 10,458 10,080
12/31/95 10,883 10,562 10,080
CLASS T LEHMAN INT GOV'T CPI
2/03/86 10,000 10,000 10,000
2/86 10,230 10,237 9,980
3/86 10,254 10,512 9,920
4/86 10,339 10,582 9,880
5/86 10,066 10,445 9,910
6/86 10,309 10,698 9,950
7/86 10,403 10,816 9,960
8/86 10,527 11,068 9,970
9/86 10,542 10,964 10,010
10/86 10,719 11,102 10,030
11/86 10,839 11,208 10,050
12/86 10,849 11,238 10,090
1/87 10,985 11,339 10,150
2/87 11,054 11,395 10,191
3/87 10,855 11,370 10,232
4/87 10,552 11,169 10,283
5/87 10,457 11,144 10,314
6/87 10,480 11,276 10,355
7/87 10,471 11,301 10,386
8/87 10,366 11,271 10,428
9/87 10,138 11,131 10,469
10/87 10,274 11,462 10,501
11/87 10,271 11,531 10,543
12/87 10,337 11,643 10,564
1/88 10,654 11,932 10,606
2/88 10,847 12,058 10,617
3/88 10,698 12,007 10,648
4/88 10,631 11,987 10,702
5/88 10,649 11,929 10,734
6/88 10,663 12,124 10,777
7/88 10,620 12,088 10,820
8/88 10,616 12,103 10,852
9/88 10,740 12,313 10,907
10/88 10,854 12,483 10,939
11/88 10,696 12,375 10,972
12/88 10,644 12,388 11,005
1/89 10,773 12,511 11,049
2/89 10,734 12,458 11,082
3/89 10,760 12,516 11,138
4/89 10,931 12,769 11,216
5/89 11,130 13,015 11,272
6/89 11,371 13,347 11,294
7/89 11,518 13,618 11,339
8/89 11,410 13,434 11,339
9/89 11,465 13,499 11,362
10/89 11,699 13,782 11,419
11/89 11,824 13,919 11,453
12/89 11,894 13,959 11,499
1/90 11,655 13,873 11,602
2/90 11,815 13,924 11,649
3/90 11,825 13,941 11,695
4/90 11,677 13,895 11,731
5/90 12,005 14,192 11,754
6/90 12,176 14,379 11,825
7/90 12,377 14,581 11,884
8/90 12,254 14,528 11,979
9/90 12,309 14,658 12,063
10/90 12,454 14,861 12,147
11/90 12,706 15,086 12,171
12/90 12,914 15,294 12,220
1/91 13,093 15,451 12,269
2/91 13,165 15,546 12,281
3/91 13,253 15,631 12,281
4/91 13,358 15,792 12,318
5/91 13,463 15,881 12,355
6/91 13,506 15,893 12,380
7/91 13,707 16,065 12,404
8/91 13,910 16,370 12,442
9/91 14,115 16,648 12,479
10/91 14,336 16,838 12,504
11/91 14,389 17,035 12,554
12/91 14,818 17,449 12,592
1/92 14,540 17,282 12,604
2/92 14,673 17,335 12,629
3/92 14,559 17,266 12,680
4/92 14,661 17,421 12,705
5/92 14,932 17,681 12,731
6/92 15,137 17,935 12,769
7/92 15,582 18,280 12,807
8/92 15,652 18,466 12,833
9/92 15,860 18,721 12,858
10/92 15,429 18,496 12,910
11/92 15,692 18,421 12,936
12/92 16,264 18,658 12,962
1/93 16,786 19,005 12,987
2/93 17,311 19,285 13,026
3/93 17,321 19,356 13,052
4/93 17,422 19,507 13,105
5/93 17,432 19,454 13,131
6/93 18,311 19,736 13,144
7/93 18,688 19,776 13,157
8/93 19,723 20,071 13,183
9/93 19,775 20,153 13,197
10/93 19,972 20,201 13,263
11/93 19,194 20,102 13,289
12/93 19,270 20,185 13,316
1/94 19,789 20,385 13,329
2/94 18,621 20,105 13,369
3/94 17,638 19,812 13,396
4/94 17,407 19,683 13,423
5/94 17,365 19,697 13,436
6/94 17,247 19,701 13,476
7/94 17,551 19,959 13,517
8/94 17,547 20,017 13,571
9/94 17,330 19,850 13,598
10/94 17,248 19,854 13,612
11/94 17,205 19,767 13,625
12/94 17,379 19,832 13,652
1/95 17,697 20,156 13,693
2/95 18,077 20,545 13,734
3/95 18,097 20,658 13,762
4/95 18,300 20,897 13,817
5/95 19,134 21,487 13,858
6/95 19,071 21,624 13,872
7/95 18,722 21,635 13,900
8/95 19,261 21,812 13,914
9/95 19,679 21,958 13,928
10/95 20,390 22,200 13,970
11/95 20,791 22,471 13,970
12/31/1995 21,361 22,693 13,970
</TABLE>
2
<PAGE>
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
[LOGO]
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Security Principal
Amount Value
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCIES - 99.38%
Federal Home Loan Mortgage Corp., 0% due 11/29/19 $90,000,000 $19,478,700
Federal National Mortgage Association, 0% due 10/09/19 102,000,000 22,318,620
GNMA Pool # TBA, 6.50%, due 1/15/99 3,000,000 2,975,610
GNMA Pool #367856, 6.50%, due 9/15/23 1,702,880 1,690,620
GNMA Pool #367431, 6.50%, due 12/15/23 1,963,609 1,949,471
GNMA Pool #372896, 6.50%, due 12/15/23 1,713,738 1,701,399
GNMA Pool #366750, 6.50%, due 3/15/24 4,189,719 4,159,553
GNMA Pool #376430, 6.50%, due 3/15/24 2,755,567 2,735,727
GNMA Pool #351481, 6.50%, due 4/15/24 3,915,340 3,887,150
GNMA Pool #352824, 6.50%, due 4/15/24 1,839,821 1,826,575
GNMA Pool #780035, 6.50%, due 7/15/24 3,811,383 3,786,342
GNMA Pool #411355, 6.50%, due 12/15/25 2,436,184 2,418,643
GNMA Pool #417514, 6.50%, due 12/15/25 2,157,235 2,141,703
GNMA Pool #420591, 6.50%, due 12/15/25 1,965,300 1,951,150
GNMA Pool #420596, 6.50%, due 12/15/25 1,995,150 1,980,785
GNMA Pool #421387, 6.50%, due 12/15/25 1,960,000 1,945,888
GNMA Pool #780144, 7.00%, due 7/15/24 69,115,749 69,979,005
GNMA Pool #348628, 7.50%, due 4/15/23 3,098,347 3,198,021
GNMA Pool #337620, 7.50%, due 4/15/23 964,080 995,094
GNMA Pool #334644, 7.50%, due 6/15/23 949,784 980,338
GNMA Pool #340821, 7.50%, due 6/15/23 943,629 973,986
GNMA Pool #359515, 7.50%, due 5/15/24 941,702 969,350
GNMA Pool #375893, 7.50%, due 6/15/24 960,794 989,003
GNMA Pool #397463, 7.50%, due 6/15/24 949,338 977,210
-----------
TOTAL INVESTMENT SECURITIES - 99.38%
(cost $146,502,019) 156,009,943
REPURCHASE AGREEMENT - 2.29%
Agreement with State Street Bank and Trust bearing
interest at 5.25% dated 12/29/95 to be repurchased
1/02/96 at $3,596,097 and collateralized by $3,585,000
U.S. Treasury Notes, 6.875% due 10/31/96, value
$3,669,762 (cost $3,595,572) 3,594,000 3,595,572
Liabilities in excess of other assets - (1.67%) (2,622,266)
-----------
Net Assets - 100.00% $156,983,249
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
[PHOTO][LOGO][PHOTO][LOGO]
THOMAS OLE DIAL PRESCOTT B. CROCKER
INVESTMENT ENVIRONMENT
THE MARKETS
- American government bond markets posted the third strongest yearly
total return of the century in 1995 when investor sentiment shifted
from the expectation of accelerating economic growth to the reality
of economic soft landing. In the backdrop of benign inflation
pressures the Federal Reserve lowered interest rates 1/2% while
interest rates in the long treasury market dropped 2 percentage
points to 6%. 1996 is expected to bring further declines in short
interest rates of up to 1 percentage point while long rates are
expected to trade in a range of 5.5% to 6.5%.
- Broad stock indexes achieved dramatic total returns of 33.4%, as
measured by the Dow, as American corporate earnings grew 25% and
multiples were bolstered by the dramatic drop in long interest rates.
Expected future earnings growth of 10-15% and stable bond markets
support a positive outlook for equity markets in 1996.
- High Yield markets completed a highly successful year with broad
indexes providing between 17 and 19% in total return. Investor fund
flows into high yield funds totaled $16.2 billion and provided strong
technical strength to the market. Although default rates moved higher
as the year progressed and high yield to treasury spreads increased
some 100 basis points, total returns were highest in the non rated
corporate categories. Single B rated bonds returned 16.6%. 1996
outlook is also positive in response to strong technical demand and
continued moderate economic growth.
- Emerging bond markets suffered heavily in the first quarter in
response to the Mexican Peso crisis but rallied strongly in the final
months to post high returns of some 45% for broad indexes. High
relative yields and improving emerging economies provide a positive
outlook for returns in 1996.
- Foreign Markets were also strong throughout the year outperforming
the U.S. while yield spreads generally narrowed 15 to 40 basis points
to the U.S. yield curve when foreign central banks continued to ease.
The dollar strengthened against the Yen and European currencies.
THE FUND
- The Fund's NAV moved from $11.71 to $12.39 over the year to provide a
total return of 14.5% for Class T shares.
- Duration was maintained between four and seven years over the year in
an effort to keep NAV price volatility low.
- Portfolio weightings averaged 25% in U.S. government bonds, 25% in
foreign government bonds, 40% in U.S. High Yield and 10% in Emerging
market debt.
CURRENT STRATEGY
- The Fund will adjust its duration to exploit the expected range of
5 1/2 to 6 1/2% in the long bond market.
- Emerging Market position will be strengthened further as
opportunities arise on price consolidation.
- High Yield holdings will continue to be characterized as high quality
and will be overweighted.
---------------------------------------------------------------------------
FUND INFORMATION (ALL DATA IS AS OF 12/31/95)
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
<S> <C> <C>
NAME % FUND
1. U.S. Treas 6.125% '99 6.8%
2. Australia 12.0% '99 5.2
3. U.S. Treas 9.125% '99 2.7
4. New Zealand 6.5% '00 2.5
5. GNMA 6.5% 2.3
6. British Columbia 9.0%
'01 2.2
7. Canada 9.5 % '98 2.2
8. Ralph's 11.0% '05 1.9
9. Cal En. 0% '04 1.7
10. Americo Life 1.6
---
29.1%
<CAPTION>
CREDIT RATING DISTRIBUTION
<S> <C> <C>
AAA-AA 39.4%
BB 26.8
B 29.5
Caa/NR 4.3
---
100.0%
<CAPTION>
ASSET ALLOCATION
<S> <C> <C>
U.S. High Yield 38.4%
Foreign Govt. 23.5
U.S. Govt. 14.6
Foreign High Yield 11.2
U.S. Corporates 3.3
Equity 2.6
</TABLE>
4
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
[LOGO]
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NORTHSTAR
ADVANTAGE STRATEGIC
INCOME FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH CLASS OF SHARES
THROUGH THE FUND'S FISCAL YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended December
31, 1995, with all distributions reinvested in shares. The average annualized
total return for Class A shares of 1.83% for the period since the classes'
inception on June 5, 1995 reflects payment of the maximum sales charge of 4.75%.
Average annualized total returns of 0.95% and 7.96% since inception on June 5,
1995 for Class B and Class C shares, respectively, and total annual returns
since inception on July 1, 1994 of 9.12% for Class T shares, reflect applicable
contingent deferred sales charges (maximum contingent deferred sales charge for
Class B of 5.00% declines to 0% and Class T shares of 4.00% declines to 0% after
five years; and maximum charge for Class C shares is 1.00% during the first year
of investment only). All performance data shown represents past performance, and
should not be considered indicative of future performance.
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND -- CLASS A
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND -- CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
CLASS A LEHMAN AGG BOND CPI
6/05/95 9,525 10,000 10,000
6/30/95 9,491 10,073 10,010
7/31/95 9,565 10,051 10,030
8/31/95 9,664 10,172 10,040
9/30/95 9,771 10,271 10,050
10/31/95 9,839 10,405 10,080
11/30/95 9,934 10,561 10,080
12/31/95 10,102 10,709 10,080
CLASS B LEHMAN AGG BOND CPI
6/05/95 10,000 10,000 10,000
6/30/95 9,463 10,073 10,010
7/31/95 9,535 10,051 10,030
8/31/95 9,631 10,172 10,040
9/30/95 9,743 10,271 10,050
10/31/95 9,792 10,405 10,080
11/30/95 9,892 10,561 10,080
12/31/95 10,054 10,709 10,080
</TABLE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND -- CLASS C
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND -- CLASS T
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
CLASS C LEHMAN AGG BOND CPI
6/05/95 10,000 10,000 10,000
6/30/95 9,851 10,073 10,010
7/31/95 9,923 10,051 10,030
8/31/95 10,020 10,172 10,040
9/30/95 10,135 10,271 10,050
10/31/95 10,183 10,405 10,080
11/30/95 10,276 10,561 10,080
12/31/95 10,447 10,709 10,080
CLASS T LEHMAN AGG BOND CPI
7/01/94 10,000 10,000 10,000
7/31/94 9,659 10,199 10,030
8/31/94 9,860 10,211 10,070
9/30/94 9,843 10,061 10,090
10/31/94 9,787 10,052 10,100
11/30/94 9,748 10,030 10,110
12/31/94 9,824 10,099 10,131
1/31/95 9,893 10,299 10,161
2/28/95 10,175 10,544 10,192
3/31/95 10,212 10,609 10,212
4/30/95 10,449 10,757 10,253
5/31/95 10,619 11,173 10,284
6/30/95 10,628 11,255 10,294
7/31/95 10,810 11,230 10,314
8/31/95 10,920 11,366 10,325
9/30/95 11,040 11,476 10,335
10/31/95 11,104 11,626 10,366
11/30/95 11,219 11,800 10,366
12/31/95 11,399 11,965 10,366
</TABLE>
5
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Security Principal
Amount Value
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
INVESTMENT GRADE SECURITIES - 22.38%
DOMESTIC BONDS & NOTES - 3.39%
BROADCASTING & CABLE - 1.31%
Turner Broadcasting Systems, Inc.
8.40%, Sr. Debentures, 2/01/24 $1,000,000 $1,004,670
---------
PACKAGING - 0.74%
Owens-Illinois, Inc.
11.00%, Sr. Debentures, 12/01/03 500,000 567,500
---------
TRANSPORTATION - 1.34%
American President Co. Ltd.
7.125%, Sr. Notes, 11/15/03 500,000 512,550
Electronic Transfer Master Trust
9.35%, Certificate Series, 4/01/02 (1) 500,000 508,375
---------
1,020,925
---------
TOTAL DOMESTIC BONDS & NOTES
(Cost $2,528,060) 2,593,095
---------
FOREIGN BONDS & NOTES - 18.99%
FOREIGN GOVERNMENT SECURITIES - 18.99% (12)
Canadian Government Bonds, 9.00%, due 12/01/04 1,000,000 825,081
Canadian Government Bonds, 9.50%, due 10/01/98 2,100,000 1,665,936
Commonwealth of Australia Government Bonds, 10.00%, due
2/15/06 1,000,000 833,098
Commonwealth of Australia Government Bonds, 12.00%, due
11/15/01 4,500,000 3,979,971
Kingdom of Denmark, 8.00%, due 3/15/06 6,000,000 1,136,677
New Zealand, 6.50%, due 2/15/00 3,000,000 1,885,297
Province of British Columbia, 9.50%, due 1/09/12 2,000,000 1,705,016
Spanish Government Bonds, 10.00%, due 2/28/05 112,000,000 936,627
Spanish Government Bonds, 10.90%, due 8/30/03 60,000,000 521,946
U.K. Treasury Gilts, 8.50%, due 12/07/05 350,000 584,160
U.K. Treasury Gilts, 9.50%, due 1/15/99 250,000 419,320
---------
14,493,129
---------
TOTAL FOREIGN BONDS & NOTES
(Cost $14,149,883) 14,493,129
---------
TOTAL INVESTMENT GRADE SECURITIES
(Cost $16,677,943) 17,086,224
---------
HIGH YIELD SECURITIES - 54.16%
DOMESTIC BONDS & NOTES - 38.44%
AUTOMOTIVE - 1.30%
Walbro Corp.
9.875%, Sr. Notes, 7/15/05 1,000,000 992,500
---------
</TABLE>
6
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Principal
Amount/Units Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BROADCASTING & CABLE - 4.50%
Cablevision Systems Corp.
10.75%, Sr. Subordinated Debentures, 4/01/04 $ 500,000 $ 528,750
Chancellor Broadcasting Co.
12.50%, Sr. Subordinated Notes, 10/01/04 500,000 537,500
Granite Broadcasting Corp.
10.375%, Sr. Subordinated Notes, 5/15/05 (1) 250,000 257,812
Paxson Communications Corp.
11.625%, Sr. Subordinated Notes, 10/01/02 (1) 500,000 515,000
SCI Television, Inc.
11.00%, Sr. Notes, 6/30/05 550,000 587,125
Sinclair Broadcasting Group, Inc.
10.00%, Sr. Subordinated Notes, 12/15/03 500,000 513,750
Spanish Broadcasting System, Inc.
7.50/12.50%, Sr. Notes, 6/15/02 (2) 500,000 492,500
---------
3,432,437
---------
CHEMICALS - 1.80%
LaRoche Industries, Inc.
13.00%, Sr. Subordinated Notes, 8/15/04 800,000 854,000
Pioneer Americas Acquisition Corp.
13.375%, Sr. Notes, 4/01/05 (1) 500,000 520,000
---------
1,374,000
---------
CONGLOMERATE - 0.58%
Terex Corp.
13.75%, Units, 5/15/02 (1) (3) 500 442,500
---------
DEFENSE - 0.72%
Alliant Techsystems, Inc.
11.75%, Sr. Subordinated Notes, 3/01/03 500,000 553,750
---------
ENERGY - 1.73%
California Energy, Inc.
0/10.25%, Discount Notes, 1/15/04 (2) 1,400,000 1,323,000
---------
FINANCE & BANKING - 1.06%
HMC Acquisition Properties Inc.
9.00%, Sr. Notes, 12/15/07 (1) 800,000 810,000
---------
FOOD & BEVERAGE - 0.68%
Curtice-Burns Foods, Inc.
12.25%, Sr. Subordinated Notes, 2/01/05 500,000 517,500
---------
GAMING - 3.97%
Ballys Park Place Funding, Inc.
9.25%, 1st Mortgage Notes, 3/15/04 500,000 507,500
Grand Casinos, Inc.
10.125%, 1st Mortgage Notes, 12/01/03 900,000 942,750
Mohegan Tribal Gaming Authority
13.50%, Sr. Secured Notes, 11/15/02 (1) 500,000 541,250
Trump Plaza Funding, Inc.
10.875%, Guaranteed Mortgage Notes, 6/15/01 1,000,000 1,040,000
---------
3,031,500
---------
</TABLE>
7
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Security Principal
Amount/Units Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GROCERY - 5.07%
Brunos, Inc.
10.50%, Sr. Subordinated Notes, 8/01/05 $ 500,000 $ 493,750
Dairy Mart Convenience Stores, Inc.
10.25%, Sr. Subordinated Notes, 3/15/04 750,000 648,750
Farm Fresh, Inc.
12.25%, Sr. Notes, 10/01/00 1,500,000 1,237,500
Ralphs Grocery Co.
11.00%, Sr. Subordinated Notes, 6/15/05 1,500,000 1,488,750
---------
3,868,750
---------
INSURANCE - 1.63%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 1,300,000 1,241,500
---------
LODGING & RESTAURANTS - 1.67%
American Restaurant Group
12.00%, Sr. Secured Notes, 9/15/98 1,000,000 780,000
John Q. Hammons Hotels
8.875%, 1st Mortgage Notes, 2/15/04 500,000 492,500
---------
1,272,500
---------
PAPER & FOREST PRODUCTS - 0.68%
Stone Container Corp.
10.75%, 1st Mortgage Notes, 10/01/02 500,000 518,750
---------
PRINTING & PUBLISHING - 0.67%
Garden State Newspapers, Inc.
12.00%, Sr. Subordinated Secured Notes, 7/01/04 500,000 510,000
---------
RETAIL - 1.51%
Duane Reade Corp.
12.00%, Sr. Notes , 9/15/02 1,000,000 970,000
Wherehouse Entertainment, Inc.
13.00%, Sr. Subordinated Notes, 8/01/02 (8)(11) 1,000,000 180,000
---------
1,150,000
---------
STEEL - 3.43%
AK Steel Corp.
10.75%, Sr. Notes, 4/01/04 500,000 555,000
NS Group, Inc.
13.50%, Units, 7/15/03 (4) 1,250 1,125,000
Sheffield Steel Corp.
12.00%, 1st Mortgage Notes, 11/01/01 500,000 457,500
WCI Steel, Inc.
10.50%, Sr. Notes, 3/01/02 500,000 483,750
---------
2,621,250
---------
</TABLE>
8
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Principal
Amount/Units Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TELECOMMUNICATIONS - 5.57%
American Communication Services, Inc.
0/13.00%, Units, 11/01/05 (1) (2) (5) 2,000 $1,105,000
Dial Call Communications, Inc.
0/10.25%, Sr. Discount Notes, 12/15/05 (2) $2,000,000 1,070,000
IXC Communications, Inc.
12.50%, Sr. Notes, 10/01/05 (1) 900,000 965,250
Mobile Telecommunication Technologies Corp.
13.50%, Sr. Notes, 12/15/02 1,000,000 1,115,000
---------
4,255,250
---------
TEXTILES - 0.65%
Synthetic Industries, Inc.
12.75%, Debentures, 12/01/02 500,000 496,250
---------
TRANSPORTATION - 1.22%
Johnstown America Industries, Inc.
11.75%, Sr. Subordinated Notes, 8/15/05 500,000 455,000
Moran Transportation Co.
11.75%, Sr. Guaranteed Notes, 7/15/04 500,000 475,000
---------
930,000
---------
TOTAL DOMESTIC BONDS & NOTES
(cost $29,693,156) 29,341,437
---------
FOREIGN BONDS & NOTES - 15.72%
BANKING - 1.87%
Banco Nacional De Mexico
7.00%, Notes, 12/15/99 (6) 1,500,000 1,203,750
Banco Rio De La Plata SA
8.75%, Notes, 12/15/03 250,000 220,000
---------
1,423,750
---------
BROADCASTING & CABLE - 1.48%
Rogers Cablesystems Ltd.
9.65%, Sr. Secured Debentures, 1/15/14 (13) 1,750,000 1,127,792
---------
CHEMICAL - 0.68%
Acetex Corp.
9.75%, Sr. Secured Notes, 10/01/03 (1) 500,000 521,250
---------
FOREIGN GOVERNMENT SECURITIES - 4.55%
Federal Republic of Brazil Capitalization Bonds
8.00%, Government Guaranty, 4/15/14 1,061,208 604,889
Mexican Cetes
0%, Government Guaranty, 7/25/96 (12) 4,126,180 420,694
Republic of Argentina
5.00%, Government Guaranty, 3/31/23 1,000,000 575,620
Republic of Argentina
6.8125%, Government Guaranty, 3/31/05 1,000,000 707,500
Republic of Ecuador
6.8125%, Government Guaranty, 2/28/25 1,000,000 511,250
United Mexican States
6.25%, Debentures, 12/31/19 (10) 1,000,000 656,250
---------
3,476,203
---------
</TABLE>
9
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Security Principal
Amount/Shares Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PAPER - 3.51%
Empaques Ponderosa
8.75%, Sr. Notes, 12/06/96 $ 750,000 $ 731,250
Grupo Industrial Durango SA
12.00%, Notes, 7/15/01 1,000,000 890,000
Indah Kiat International Finance
12.50%, Guaranteed Secured Notes, 6/15/06 500,000 498,750
Malette, Inc.
12.25%, Sr. Secured Notes, 7/15/04 500,000 560,000
---------
2,680,000
---------
TELECOMMUNICATION - 0.69%
Videotron Ltd.
10.25%, Sr. Subordinated Notes, 10/15/02 500,000 526,250
---------
TRANSPORTATION - 0.36%
Mexico City Toluca
11.00%, Debentures, 5/19/02 (1) 477,118 274,343
---------
UTILITIES - 2.58%
Sodigas Pampeana
10.50%, Notes, 7/06/99 1,000,000 970,000
Telecom Brazil Funding Corp.
11.13%, Guaranteed Secured Notes, 12/09/99 (1)(7) 1,000,000 1,002,500
---------
1,972,500
---------
TOTAL FOREIGN BONDS & NOTES
(cost $12,094,061) 12,002,088
---------
TOTAL HIGH YIELD SECURITIES
(cost $41,787,217) 41,343,525
---------
COMMON STOCKS - 0.00% (8)
GAMING - 0.00%
Capital Gaming International, Inc. 14,701 2,307
---------
TOTAL COMMON STOCKS
(cost $103,128) 2,307
---------
PREFERRED STOCKS - 2.54%
BANKING - 1.03%
First Nationwide Bank, 11.50% 7,000 785,750
---------
HEALTHCARE - 1.51%
Foxmeyer Health Corp., $4.20 Series A (9) 30,787 1,150,664
---------
TOTAL PREFERRED STOCKS
(cost $1,823,388) 1,936,414
---------
WARRANTS - 0.06%
AEROSPACE - 0.00%
Sabreliner Corp., (expires 2100) 500 2,500
---------
AIRLINES - 0.00%
CHC Helicopter Corp., (expires 12/15/00) 4,000 2,600
---------
GAMING - 0.00%
Capital Gaming International, Inc., (expires 2/01/99) 11,137 390
---------
</TABLE>
10
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Principal
Amount/Shares Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTHCARE - 0.00%
Chattem, Inc., (expires 6/17/99) (1) 500 $ 1,375
---------
RETAIL - 0.04%
Central Rents, Inc., (expires 2003) 500 30,000
---------
STEEL - 0.02%
Sheffield Steel Corp., (expires 11/01/01) 2,500 12,500
---------
TOTAL WARRANTS
(cost $40,746) 49,365
---------
U.S. GOVERNMENT AND AGENCIES - 14.52%
GNMA 6.50%, due 1/20/24 $1,725,912 1,754,062
GNMA 8.50%, due 1/15/17 - 7/15/24 749,565 789,028
GNMA 9.00%, due 1/15/20 - 11/15/24 769,541 816,894
Resolution Trust Corp. Mortgage Pass 8.00%, due 6/25/26 428,502 436,237
U.S. Treasury Notes, 6.75%, due 5/31/99 5,000,000 5,222,900
U.S. Treasury Notes, 9.125%, due 5/15/99 1,850,000 2,065,081
---------
TOTAL U.S. GOVERNMENT AND AGENCIES
(cost $10,518,958) 11,084,202
---------
TOTAL INVESTMENT SECURITIES - 93.66%
(cost $70,951,380) 71,502,037
REPURCHASE AGREEMENT - 4.23%
Agreement with State Street Bank and Trust bearing interest
at 5.25% dated 12/29/95 to be repurchased 1/02/96 at
$3,226,881 and collateralized by $3,215,000 U.S. Treasury
Notes, 6.875% due 10/31/96, value $3,291,014
(cost $3,226,411) 3,225,000 3,226,411
Other assets less liabilities - 2.11% 1,604,976
---------
Net Assets - 100.00% $76,333,424
---------
---------
</TABLE>
(1) Sale restricted to qualified institutional investors.
(2) Step bond.
(3) A unit consists of $1,000 par value 13.75%, Sr. Secured Notes, 5/15/02
and 4 common stock Appreciation rights.
(4) A unit consists of $1,000 par value 13.50%, Sr. Secured Notes, 7/15/03
and 1 warrant.
(5) A unit consists of $1,000 par value 0%/13.00%, Sr. Discount Notes,
11/01/05 and 1 warrant.
(6) Convertible bonds.
(7) Floating rate security. Rate as of December 31, 1995.
(8) Non-income producing.
(9) Payment-in-kind security.
(10) Issued with 1,000 value recovery rights (expiration 2003) per $1,000
par value 6.25%, Debentures, 12/31/19.
(11) Defaulted security.
(12) The principal amount is shown in the respective country's currency.
(13) The principal amount is shown in Canadian Dollars.
See accompanying notes to financial statements.
11
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
[PHOTO][LOGO]
PRESCOTT B. CROCKER
INVESTMENT ENVIRONMENT
THE MARKETS
- American government bond markets posted the third strongest yearly
total return of the century in 1995 when investor sentiment shifted
from the expectation of accelerating economic growth to the reality
of economic soft landing. In the backdrop of benign inflation
pressures the Federal Reserve lowered interest rates 1/2% while
interest rates in the long treasury market dropped 2 percentage
points to 6%. 1996 is expected to bring further declines in short
interest rates of up to 1 percentage point while long rates are
expected to trade in a range of 5.5% to 6.5%.
- Broad stock indexes achieved dramatic total returns of 33.4%, as
measured by the Dow, as American corporate earnings grew 25% and
multiples were bolstered by the dramatic drop in long interest rates.
Expected future earnings growth of 10-15% and stable bond markets
support a positive outlook for equity markets in 1996.
- High yield markets completed a highly successful year with broad
indexes providing between 17% and 19% in total return. Investor fund
flows into high yield funds totaled $16.2 billion and provided strong
technical strength to the market. Although default rates moved higher
as the year progressed and high yield to treasury spreads increased
some 100 basis points, total returns were highest in the non rated
corporate categories. Single B rated bonds returned 16.6%. 1996
outlook is also positive in response to strong technical demand from
mutual funds and continued moderate economic growth.
- Emerging bond markets suffered heavily in the first quarter in
response to the Mexican Peso crisis but rallied strongly in the final
months to post high returns for broad indexes. High relative yields
and improving emerging economies provide a positive outlook for
return in 1996.
THE FUND
- Fund provided total returns of 13.7% for the year as net asset value
moved up from $8.29 to $8.56 on Class T shares.
- The Fund aggressively pursued a strategy of up grading its portfolio
to better handle any possible future recession. Holdings rated B+ and
higher were increased from 42% to 58% of the total and holdings rated
B- or lower were reduced from 25.6% to 15%.
- The Fund's portfolio at year end maintained an average rating of B+
and a long duration of six years.
- The average holding produced operating earnings which covered
interest expense 2.8 times.
CURRENT STRATEGY
- The Fund will look to reduce its duration as Treasury rates move
towards old lows.
- The Fund will continue to increase its weightings of higher rated
investments and non cyclicals to systematically improve its credit
profile to protect against further weakness in the economy.
- Fund returns will be more yield curve than equity market correlated.
---------------------------------------------------------------------------
FUND INFORMATION (ALL DATA IS AS OF 12/31/95)
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
<S> <C> <C> <C>
NAME % FUND
1. Heritage Media 1.8%
2. Synthetic Ind. 1.6
3. SD Warren 1.5
4. Foxmeyer Corp 1.5
5. SCI TV 1.5
6. Domtar 1.5
7. AK Steel 1.5
8. Rexene Corp. 1.5
9. Harvard Ind. 1.5
10. Pioneer Acq. 1.4
---
15.3%
<CAPTION>
CREDIT RATING DISTRIBUTION
<S> <C> <C> <C>
BB 32%
B 62
CCC 4
NR 2
---
100 %
<CAPTION>
LARGEST INDUSTRY POSITIONS
<S> <C> <C> <C>
Oil & Gas 13.1%
Broadcasting 12.5
Paper & Forest Prod. 8.0
Telecommunications 6.2
Steel 4.4
---
44.2%
</TABLE>
12
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
[LOGO]
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NORTHSTAR
ADVANTAGE HIGH
YIELD FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH CLASS OF SHARES
THROUGH THE FUND'S FISCAL YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended December
31, 1995, with all distributions reinvested in shares. The average annualized
total return for Class A shares of (1.37)% for the period since the classes'
inception on June 5, 1995 reflects payment of the maximum sales charge of 4.75%.
Average annualized total returns of (1.94)% and 5.01% since inception on June 5,
1995 for Class B and Class C shares, respectively, and total annual returns
since inception on June 5, 1989 of 10.45% for Class T shares, reflect applicable
contingent deferred sales charges (maximum contingent deferred sales charge for
Class B of 5.00% declines to 0% and Class T shares of 4.00% declines to 0% after
five years; and maximum charge for Class C shares is 1.00% during the first year
of investment only). All performance data shown represents past performance, and
should not be considered indicative of future performance.
NORTHSTAR ADVANTAGE HIGH YIELD FUND -- CLASS A
NORTHSTAR ADVANTAGE HIGH YIELD FUND -- CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
CLASS A LEHMAN HIGH YIELD BOND CPI
6/05/95 9,525 10,000 10,000
6/30/95 9,450 10,064 10,010
7/31/95 9,672 10,191 10,030
8/31/95 9,684 10,222 10,040
9/30/95 9,764 10,348 10,050
10/31/95 9,777 10,412 10,080
11/30/95 9,801 10,504 10,080
12/31/95 9,918 10,669 10,080
CLASS B LEHMAN HIGH YIELD BOND CPI
6/05/95 10,000 10,000 10,000
6/30/95 9,423 10,064 10,010
7/31/95 9,643 10,191 10,030
8/31/95 9,653 10,222 10,040
9/30/95 9,731 10,348 10,050
10/31/95 9,741 10,412 10,080
11/30/95 9,775 10,504 10,080
12/31/95 9,889 10,669 10,080
</TABLE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND -- CLASS C
NORTHSTAR ADVANTAGE HIGH YIELD FUND -- CLASS T
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
CLASS C LEHMAN HIGH YIELD BOND CPI
6/05/95 10,000 10,000 10,000
6/30/95 9,817 10,064 10,010
7/31/95 10,043 10,191 10,030
8/31/95 10,050 10,222 10,040
9/30/95 10,128 10,348 10,050
10/31/95 10,135 10,412 10,080
11/30/95 10,167 10,504 10,080
12/31/95 10,283 10,669 10,080
CLASS T LEHMAN HIGH YIELD BOND CPI
6/05/89 10,000 10,000 10,000
6/89 9,954 10,124 10,020
7/89 9,916 10,111 10,060
8/89 9,969 10,145 10,060
9/89 9,725 9,975 10,080
10/89 9,242 9,738 10,131
11/89 9,181 9,719 10,161
12/89 9,120 9,734 10,202
1/90 8,629 9,525 10,293
2/90 8,439 9,329 10,335
3/90 8,659 9,573 10,376
4/90 8,399 9,557 10,407
5/90 8,671 9,742 10,428
6/90 8,924 9,977 10,490
7/90 9,111 10,246 10,543
8/90 8,562 9,663 10,627
9/90 7,879 8,957 10,702
10/90 7,529 8,487 10,777
11/90 7,653 8,752 10,798
12/90 7,789 8,796 10,841
1/91 7,968 9,037 10,885
2/91 8,502 10,026 10,896
3/91 9,042 10,617 10,896
4/91 9,717 11,052 10,928
5/91 9,827 11,072 10,961
6/91 9,885 11,400 10,983
7/91 10,210 11,764 11,005
8/91 10,337 12,035 11,038
9/91 10,519 12,202 11,071
10/91 11,035 12,610 11,093
11/91 11,097 12,675 11,138
12/91 11,410 12,858 11,171
1/92 12,350 13,311 11,182
2/92 12,834 13,639 11,205
3/92 12,869 13,808 11,249
4/92 12,951 13,861 11,272
5/92 13,168 14,056 11,294
6/92 13,267 14,188 11,328
7/92 13,625 14,403 11,362
8/92 13,680 14,591 11,385
9/92 13,936 14,740 11,408
10/92 13,868 14,532 11,453
11/92 14,285 14,716 11,476
12/92 14,552 14,883 11,499
1/93 14,903 15,316 11,522
2/93 14,901 15,586 11,557
3/93 15,257 15,787 11,580
4/93 15,158 15,924 11,626
5/93 15,668 16,114 11,649
6/93 16,214 16,452 11,661
7/93 16,531 16,612 11,673
8/93 16,664 16,751 11,696
9/93 16,799 16,795 11,708
10/93 17,140 17,134 11,766
11/93 17,242 17,216 11,790
12/93 17,304 17,430 11,813
1/94 17,859 17,808 11,825
2/94 18,025 17,762 11,861
3/94 17,533 17,090 11,884
4/94 17,095 16,974 11,908
5/94 17,093 16,983 11,920
6/94 17,033 17,035 11,956
7/94 17,147 17,180 11,992
8/94 17,224 17,302 12,040
9/94 17,233 17,304 12,064
10/94 17,271 17,345 12,076
11/94 16,948 17,127 12,088
12/94 16,926 17,254 12,112
1/95 17,127 17,488 12,149
2/95 17,537 18,088 12,185
3/95 17,660 18,283 12,209
4/95 18,159 18,748 12,258
5/95 18,432 19,273 12,295
6/95 18,367 19,396 12,307
7/95 18,793 19,641 12,332
8/95 18,814 19,701 12,344
9/95 18,964 19,944 12,357
10/95 18,983 20,067 12,394
11/95 19,048 20,244 12,394
12/31/95 19,246 20,562 12,394
</TABLE>
13
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Security Principal
Amount Value
- ------------------------------------------------------------------------------
<S> <C> <C>
DOMESTIC BONDS & NOTES - 66.48%
AIRLINES - 1.32%
US Air, Inc.
10.375%, Pass-Thru Certificates, 3/01/13 $ 2,500,000 $ 2,362,500
------------
AUTOMOTIVE - 2.56%
Harvard Industries, Inc.
12.00%, Sr. Notes, 7/15/04 2,500,000 2,612,500
Walbro Corp.
9.875%, Sr. Notes, 7/15/05 2,000,000 1,985,000
------------
4,597,500
------------
BROADCASTING & CABLE - 8.28%
Busse Broadcasting Corp.
11.625%, Sr. Secured Notes, 10/15/00 (1) 2,000,000 1,920,000
Cablevision Systems Corp.
9.875%, Sr. Subordinated Debentures, 4/01/23 1,500,000 1,556,250
Granite Broadcasting Corp.
10.375%, Sr. Subordinated Notes, 5/15/05 (1) 500,000 515,625
Heritage Media Corp.
11.00%, Sr. Subordinated Notes, 10/01/02 3,000,000 3,187,500
SCI Television, Inc.
11.00%, Sr. Notes, 6/30/05 2,500,000 2,668,750
Sinclair Broadcasting Group, Inc.
10.00%, Sr. Subordinated Notes, 12/15/03 1,250,000 1,284,375
Sinclair Broadcasting Group, Inc.
10.00%, Sr. Subordinated Notes, 9/30/05 1,250,000 1,284,375
Spanish Broadcasting System, Inc.
7.50%/12.50%, Sr. Notes, 6/15/02 (2) 2,500,000 2,462,500
------------
14,879,375
------------
BUILDING MATERIALS - 1.33%
Building Materials Corp. of America
11.75%, Sr. Deferred Coupon Notes, 7/01/04 3,500,000 2,397,500
------------
CHEMICALS - 4.23%
NL Industries, Inc. (2)
0%, Sr. Secured Discount Notes, 10/15/05 3,000,000 2,332,500
Pioneer Americas Acquisition Corp.
13.375%, Sr. Notes, 4/01/05 (1) 2,500,000 2,600,000
Rexene Corp.
11.75%, Sr. Notes, 12/01/04 2,500,000 2,662,500
------------
7,595,000
------------
CONSUMER NONDURABLES - 2.65%
Hines Horticulture, Inc.
11.75%, Sr. Subordinated Notes, 10/05/05 (1) 1,500,000 1,567,500
Ithaca Industries
11.125%, Sr. Subordinated Notes, 12/15/02 (11) 1,975,000 701,125
Renaissance Cosmetics, Inc.
13.75%, Sr. Notes, 8/15/01 2,500,000 2,500,000
------------
4,768,625
------------
</TABLE>
14
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Principal
Amount/Units Value
- ------------------------------------------------------------------------------
<S> <C> <C>
DEFENSE - 0.92%
Alliant Techsystems, Inc.
11.75%, Sr. Subordinated Notes, 3/01/03 $ 1,500,000 $ 1,661,250
------------
ENERGY - 0.57%
Kenetech Corp.
12.75%, Sr. Secured Notes, 12/15/02 2,750,000 1,031,250
------------
ENTERTAINMENT - 1.12%
United Artists Theatre Circuit
9.30%, Pass Thru Certificates, 7/01/15 (1) 2,000,000 2,005,000
------------
ENVIRONMENTAL CONTROL - 1.06%
Allied Waste Industries, Inc.
12.00%, Sr. Subordinated Notes, 2/01/04 1,750,000 1,903,125
------------
FOOD & BEVERAGE - 2.62%
Curtice-Burns Foods, Inc.
12.25%, Sr. Subordinated Notes, 2/01/05 2,500,000 2,587,500
South Carolina International Services, Inc.
13.00%, Sr. Subordinated Notes, 10/01/05 2,000,000 2,120,000
------------
4,707,500
------------
GAMING - 3.95%
Ballys Grand, Inc.
10.375%, 1st Mortgage Notes, 12/15/03 1,500,000 1,537,500
Ballys Park Place Funding, Inc.
9.25%, 1st Mortgage Notes, 3/15/04 500,000 507,500
Grand Casinos, Inc.
10.125%, 1st Mortgage Notes, 12/01/03 1,000,000 1,047,500
Rio Hotel & Casino, Inc.
10.625%, Sr. Subordinated Notes, 7/15/05 (1) 2,000,000 2,065,000
Trump Taj Mahal Funding, Inc.
11.35%, Units, 11/15/99 (4) 2,000 1,935,000
------------
7,092,500
------------
GROCERY - 3.35%
Brunos, Inc.
10.50%, Sr. Subordinated Notes, 8/01/05 1,500,000 1,481,250
Pathmark Stores, Inc.
11.625%, Subordinated Notes, 6/15/02 2,500,000 2,543,750
Ralphs Grocery Co.
11.00%, Sr. Subordinated Notes, 6/15/05 2,000,000 1,985,000
------------
6,010,000
------------
HEALTHCARE - 0.62%
Tenet Healthcare Corp.
10.125%, Sr. Subordinated Notes, 3/01/05 1,000,000 1,112,500
------------
HEAVY EQUIPMENT - 0.99%
Terex Corp.
13.75%, Units, 5/15/02 (1) (3) 2,000 1,770,000
------------
INSURANCE - 1.20%
Americo Life, Inc.
9.25%, Sr. Subordinated Notes, 6/01/05 2,250,000 2,148,750
------------
</TABLE>
15
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Security Principal
Amount Value
- ------------------------------------------------------------------------------
<S> <C> <C>
LODGING & RESTAURANTS - 1.70%
Family Restaurants, Inc.
9.75%, Sr. Notes, 2/01/02 $ 1,000,000 $ 565,000
John Q. Hammons Hotels
8.875%, 1st Mortgage Notes, 2/15/04 1,500,000 1,477,500
John Q. Hammons Hotels LP
9.75%, 1st Mortgage Notes, 10/01/05 (1) 1,000,000 1,010,000
------------
3,052,500
------------
MANUFACTURING - 1.17%
Wyman-Gorgon Co.
10.75%, Sr. Notes, 3/15/03 2,000,000 2,110,000
------------
OIL & GAS - 8.22%
AmeriGas Partners LP
10.125%, Sr. Notes, 4/15/07 (1) 1,000,000 1,075,000
California Energy, Inc.
9.875%, Sr. Notes, 6/30/03 1,000,000 1,047,500
California Energy, Inc.
0/10.25%, Sr. Discount Notes, 1/15/04 (2) 2,650,000 2,504,250
Chesapeake Energy Corp.
10.50%, Sr. Notes, 6/01/02 (1) 2,000,000 2,105,000
HS Resources, Inc.
9.875%, Sr. Subordinated Notes, 12/01/03 2,500,000 2,465,625
Kelley Oil & Gas Corp.
13.50%, Sr. Notes, 6/15/99 2,500,000 2,025,000
Petroleum Heat and Power, Inc.
9.375%, Subordinated Debentures, 2/01/06 1,500,000 1,477,500
TransTexas Gas Corp.
11.50%, Sr. Secured Notes, 6/15/02 2,000,000 2,070,000
------------
14,769,875
------------
PACKAGING - 2.09%
Crown Packaging Holdings Ltd.
0%, Sr. Subordinated Discount Notes, 11/01/03 3,750,000 1,687,500
Gaylord Container Corp.
11.50%, Sr. Notes, 5/15/01 2,000,000 2,062,500
------------
3,750,000
------------
PAPER & FOREST PRODUCTS - 1.53%
SD Warren Co.
12.00%, Sr. Subordinated Notes, 12/15/04 2,500,000 2,750,000
------------
PRINTING & PUBLISHING - 1.14%
Garden State Newspapers, Inc.
12.00%, Sr. Subordinated Notes, 7/01/04 2,000,000 2,040,000
------------
RETAIL - 1.43%
Waban, Inc.
11.00%, Sr. Subordinated Notes, 5/15/04 2,500,000 2,562,500
------------
</TABLE>
16
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Principal
Amount/Units Value
- ------------------------------------------------------------------------------
<S> <C> <C>
STEEL - 4.42%
AK Steel Corp.
10.75%, Sr. Notes, 4/01/04 $ 2,400,000 $ 2,664,000
NS Group, Inc.
13.50%, Units, 7/15/03 (5) 2,500 2,250,000
UCAR Global Enterprises, Inc.
12.00%, Sr. Subordinated Notes, 1/15/05 535,000 616,588
WCI Steel, Inc.
10.50%, Sr. Notes, 3/01/02 2,500,000 2,418,750
------------
7,949,338
------------
TELECOMMUNICATIONS - 3.41%
CAI Wireless Systems, Inc.
12.25%, Sr. Notes, 9/15/02 2,000,000 2,145,000
Metrocall, Inc.
10.375%, Sr. Subordinated Notes, 10/01/07 1,000,000 1,070,000
Mobilemedia Communications, Inc.
9.375%, Sr. Subordinated Notes, 11/01/07 1,000,000 1,030,000
Paging Network, Inc.
8.875%, Sr. Subordinated Notes, 2/01/06 500,000 515,000
Paging Network, Inc.
10.125%, Sr Subordinated Notes, 8/01/07 1,250,000 1,365,625
------------
6,125,625
------------
TEXTILES - 1.57%
Synthetic Industries, Inc.
12.75%, Debentures, 12/01/02 2,850,000 2,828,625
------------
TRUCKING & TRANSPORTATION - 2.18%
Johnstown America Industries, Inc.
11.75%, Sr. Subordinated Notes, 8/15/05 2,000,000 1,820,000
Moran Transportation Co.
11.75%, Sr. Secured Notes, 7/15/04 2,200,000 2,090,000
------------
3,910,000
------------
WASTE MANAGEMENT - 0.85%
Norcal Waste Systems, Inc.
12.50%, Sr. Notes, 11/15/05 (1) 1,500,000 1,518,750
------------
TOTAL DOMESTIC BONDS & NOTES
(cost $120,922,107) 119,409,588
------------
FOREIGN BONDS & NOTES - 20.27%
AIRLINES - 0.99%
CHC Helicopter Corp.
11.50%, Sr. Subordinated Notes, 7/15/02 2,000,000 1,775,000
------------
</TABLE>
17
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Security Principal
Amount Value
- ------------------------------------------------------------------------------
<S> <C> <C>
BROADCASTING & CABLE - 4.23%
Bell Cablemedia PLC
0%/11.875%, Sr. Discount Notes, 9/15/05 (1) (2) $ 2,000,000 $ 1,262,500
Comcast UK Cable Partners Ltd.
0%/11.20%, Sr. Discount Debentures, 11/15/07 (2) 3,250,000 1,893,125
Fundy Cable Ltd.
11.00%, Sr. Secured Second Priority Notes,
11/15/05 2,000,000 2,085,000
Rogers Cablesystems Ltd.
9.65%, Sr. Secured Debentures, 1/15/14 (12) 2,025,000 1,305,016
Rogers Communications, Inc.
10.875%, Sr. Debentures, 4/15/04 1,000,000 1,050,000
------------
7,595,641
------------
EMERGING MARKETS - 2.94%
Federal Republic of Brazil Eligible Interest
Bonds
6.8125%, Debentures, 4/15/06 (6) 3,000,000 2,066,250
Republic of Argentina
5.00%, Government Guaranty, 3/31/23 (6) 3,000,000 1,726,860
Republic of Ecuador
6.8125%, Government Guaranty, 2/28/25 (6) 1,000,000 511,250
United Mexican States
6.25%, Debentures, 12/31/19 (7) 1,500,000 984,375
------------
5,288,735
------------
METALS & MINING 0.16%
Agnico Eagle Mines Ltd.
3.50%, Sr. Notes, 1/27/04 350,000 290,500
------------
OIL & GAS - 1.24%
Petroleos Mexicanos Medium Term
8.625%, Debentures, 12/01/23 (1) 3,000,000 2,223,750
------------
PAPER & FOREST PRODUCTS - 6.47%
APP International Finance Co.
11.75%, Guaranteed Secured Notes, 10/01/05 2,000,000 1,960,000
Domtar, Inc.
11.25%, Debentures, 9/15/17 2,500,000 2,665,625
Grupo Industrial Durango SA
12.00%, Notes, 7/15/01 2,600,000 2,314,000
Malette, Inc.
12.25%, Sr. Secured Notes, 7/15/04 2,000,000 2,240,000
Repap New Brunswick, Inc.
10.625%, Sr. Secured Notes, 4/15/05 2,500,000 2,450,000
------------
11,629,625
------------
TELECOMMUNICATIONS - 2.80%
Fonorola Inc
12.50%, Sr. Notes, 8/15/02 1,000,000 1,055,000
Telefonica de Argentina SA
11.875%, Notes, 11/01/04 1,500,000 1,556,720
Telewest PLC
0%, Sr. Discount Debentures, 10/01/07 4,000,000 2,425,000
------------
5,036,720
------------
</TABLE>
18
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Principal
Amount/Shares Value
- ------------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION - 1.44%
Stena AB
10.50%, Sr. Notes, 12/15/05 $ 2,500,000 $ 2,581,250
------------
TOTAL FOREIGN BONDS & NOTES
(cost $35,677,651) 36,421,221
------------
CONVERTIBLE BONDS - 0.82%
LEISURE - 0.04%
Discovery Zone, Inc.
0%, Liquid Yield Option Notes, 10/14/13 250,000 64,845
------------
OIL & GAS - 0.78%
Cross Timbers Oil Co.
5.25%, Subordinated Notes, 11/01/03 1,500,000 1,397,580
------------
TOTAL CONVERTIBLE BONDS
(cost $1,636,232) 1,462,425
------------
COMMON STOCKS - 0.41%
GAMING - 0.00%
Capital Gaming International, Inc. (8) 44,540 5,568
------------
METALS & MINING - 0.41%
Freeport McMoran Copper and Gold, Inc. Class B 19,999 562,472
Freeport McMoran, Inc. 4,750 175,750
------------
738,222
------------
TOTAL COMMON STOCKS
(cost $784,094) 743,790
------------
PREFERRED STOCKS - 1.09%
BANKING - 1.09%
First Nationwide Bank, 11.50% 17,500 1,964,375
------------
TOTAL PREFERRED STOCKS
(cost $1,750,000) 1,964,375
------------
CONVERTIBLE PREFERRED STOCKS - 4.95%
HEALTHCARE - 1.50%
Foxmeyer Health Corp., $4.20 Series A (9) 71,928 2,688,309
------------
METALS & MINING - 0.61%
Freeport McMoran Copper and Gold, Inc., 5.00%
(10) 40,000 1,090,000
------------
OIL & GAS - 2.85%
BCP/Essex Holdings, 15.00% 64,584 1,711,476
Parker & Parsley Petroleum Co., 6.25% (1) 32,500 1,575,308
Tejas Gas Corp., 5.25% 38,600 1,833,500
------------
5,120,284
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $8,046,264) 8,898,593
------------
WARRANTS - 0.09% (8)
AIRLINES - 0.01%
CHC Helicopter Corp., (expires 12/15/00) 16,000 10,400
------------
CONSUMER NONDURABLES - 0.06%
Renaissance Cosmetics, Inc., (expires 8/15/01) 5,000 113,750
------------
GAMING - 0.00%
Capital Gaming International, Inc., (expires
2/01/99) 36,318 725
------------
</TABLE>
19
<PAGE>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Security Principal
Amount Value
- ------------------------------------------------------------------------------
<S> <C> <C>
PACKAGING - 0.02%
Crown Packaging Holdings Ltd., (expires 11/01/03) 3,750 $ 39,375
------------
TOTAL WARRANTS
(cost $318,150) 164,250
------------
TOTAL INVESTMENT SECURITIES - 94.11%
(cost $169,134,498) 169,064,242
REPURCHASE AGREEMENT - 4.51%
Agreement with State Street Bank and Trust
bearing interest at 5.25% dated 12/29/95 to be
repurchased 1/02/96 at $8,113,730 and
collateralized by $8,065,000 U.S. Treasury Notes,
6.875% due 10/31/96, value $8,276,158
(cost $8,112,548) $ 8,109,000 8,112,548
Other assets less liabilities - 1.38% 2,472,946
------------
Net Assets - 100.00% $179,649,736
------------
------------
</TABLE>
(1) Sale restricted to qualified institutional investors.
(2) Step bond.
(3) A unit consists of $1,000 par value 13.75%, Sr. Secured Notes, 5/15/02
and 4 common stock Appreciation rights.
(4) A unit consists of $1,000 par value 11.35%, Debentures, 11/15/99 and 1
Class A and 1 Class B common stock.
(5) A unit consists of $1,000 par value 13.50%, Sr. Secured Notes, 7/15/03
and 1 warrant.
(6) Floating rate security. Rate as of December 31, 1995.
(7) Issued with 1,000 value recovery rights (expiration 2003) per $1,000
par value 6.25%, Debentures, 12/31/19.
(8) Non-income producing securities.
(9) Payment-in-kind security.
(10) Dividend rate resets to 7.00% on 8/01/96.
(11) Defaulted security.
(12) The principal amount shown in Canadian Dollars.
See accompanying notes to financial statements.
20
<PAGE>
NORTHSTAR ADVANTAGE INCOME FUND
[PHOTO]
MARGARET D.
PATEL
INVESTMENT ENVIRONMENT
THE MARKETS
- Both the Dow Jones Industrials and the S&P 500 rose during 1995,
posting total rates of return of 33.4% and 34.1%, respectively,
reflecting good corporate earnings growth.
- Interest rates as measured by 10 year Treasury maturities fell from
7.82% at the end of December, 1994 to 5.57%, at year-end 1995
reflecting subdued economic growth and low inflation.
- Convertible issues performed well, aided both by higher underlying
equity prices as well as declining interest rates.
THE FUND
- The Fund's return of 25.1% (T shares) in the year compared to 21.7%
for the average fund in the Lipper Income Fund category (the Fund's
universe), and its results may also be compared to the 25.2% return
achieved by average for the Lipper Balanced Fund category.
- Holdings were increased in finance (insurance), industrial, energy,
airlines, and healthcare. Exposure was eliminated in
telecommunications issues representing cellular, wireless, and
alternative access providers.
- Asset allocation to intermediate term straight bonds was
substantially reduced, and holdings of convertible preferred stocks,
convertible bonds, and long term straight bonds were increased with
the proceeds. Holdings of common stock were slightly reduced.
CURRENT STRATEGY
- The Fund remains fully invested in sectors which represent reasonable
valuations for stable to improving growth. Since it seems likely that
capital appreciation from equity holdings may not be as great in 1996
versus 1995, the Fund continues to concentrate on convertible issues
(bonds and preferreds total 52% of market value) in order to achieve
higher income, while still maintaining equity exposure through the
equity linked features of convertibles.
---------------------------------------------------------------------------
FUND INFORMATION (ALL DATA IS AS OF 12/31/95)
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
HOLDINGSNAME % FUND
<S> <C> <C>
1. Jet Equipment 5.0%
2. MascoTech 4.6
3. Roche 4.4
4. AMR 3.8
5. Gencorp 3.7
6. Allmerica 3.6
7. Time Warner 3.4
8. Unocal 3.4
9. Interface 3.4
10. United Companies 3.2
------
38.5%
<CAPTION>
5 TOP SECTORS
SECTORS % FUND
<S> <C> <C>
1. Industrial 12.4%
2. Financial 11.5
3. Energy 11.1
4. Airlines 10.9
5. Drugs 7.3
------
53.2%
<CAPTION>
ASSET ALLOCATION
<S> <C> <C>
Common Stock 28.8%
Bonds 43.1
- -Convertibles 19.2
- -Straight 23.9
Preferreds (cvt.) 28.0
</TABLE>
21
<PAGE>
NORTHSTAR ADVANTAGE INCOME FUND
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NORTHSTAR
ADVANTAGE INCOME
FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH CLASS OF SHARES THROUGH
THE FUND'S FISCAL YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended December
31, 1995, with all distributions reinvested in shares. The average annualized
total return for Class A shares of 12.03% for the period since the classes'
inception on June 5, 1995 reflects payment of the maximum sales charge of 4.75%.
Average annualized total returns of 12.13% and 19.33% since inception on June 5,
1995 for Class B and Class C shares, respectively, and total annual returns
since inception on February 3, 1986 of 9.66% for Class T shares, reflect
applicable contingent deferred sales charges (maximum contingent deferred sales
charge for Class B of 5.00% declines to 0% and Class T shares of 4.00% declines
to 0% after five years; and maximum charge for Class C shares is 1.00% during
the first year of investment only). All performance data shown represents past
performance, and should not be considered indicative of future performance.
NORTHSTAR ADVANTAGE INCOME FUND -- CLASS A
NORTHSTAR ADVANTAGE INCOME FUND -- CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C> <C>
CLASS A S & P 500 CPI LEHMAN GOVT/CORP
6/05/95 9,525 10,000 10,000 10,000
6/30/95 9,475 10,280 10,010 10,064
7/31/95 9,770 10,607 10,030 10,069
8/31/95 9,921 10,604 10,040 10,152
9/30/95 10,103 11,095 10,050 10,220
10/31/95 9,996 11,039 10,080 10,332
11/30/95 10,462 11,492 10,080 10,458
12/31/95 10,672 11,760 10,080 10,562
CLASS B S & P 500 CPI LEHMAN GOVT/CORP
6/05/95 10,000 10,000 10,000 10,000
6/30/95 9,454 10,280 10,010 10,064
7/31/95 9,739 10,607 10,030 10,069
8/31/95 9,897 10,604 10,040 10,152
9/30/95 10,084 11,095 10,050 10,220
10/31/95 9,984 11,039 10,080 10,332
11/30/95 10,453 11,492 10,080 10,458
12/31/95 10,675 11,760 10,080 10,562
</TABLE>
NORTHSTAR ADVANTAGE INCOME FUND -- CLASS C
NORTHSTAR ADVANTAGE INCOME FUND -- CLASS T
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C> <C>
CLASS C S & P 500 CPI LEHMAN GOVT/CORP
6/05/95 10,000 10,000 10,000 10,000
6/30/95 9,844 10,280 10,010 10,064
7/31/95 10,143 10,607 10,030 10,069
8/31/95 10,302 10,604 10,040 10,152
9/30/95 10,481 11,095 10,050 10,220
10/31/95 10,361 11,039 10,080 10,332
11/30/95 10,849 11,492 10,080 10,458
12/31/95 11,060 11,760 10,080 10,562
CLASS T S & P 500 CPI LEHMAN GOVT/CORP
2/03/86 10,000 10,000 10,000 10,000
2/86 10,150 10,715 9,980 10,237
3/86 10,400 11,377 9,920 10,512
4/86 10,300 11,217 9,880 10,582
5/86 10,420 11,780 9,910 10,445
6/86 10,551 12,045 9,950 10,698
7/86 10,556 11,338 9,960 10,816
8/86 11,046 12,145 9,970 11,068
9/86 10,763 11,208 10,010 10,964
10/86 11,063 11,821 10,030 11,102
11/86 11,198 12,075 10,050 11,208
12/86 11,076 11,833 10,090 11,238
1/87 11,607 13,393 10,150 11,339
2/87 11,713 13,887 10,191 11,395
3/87 11,778 14,356 10,232 11,370
4/87 11,489 14,191 10,283 11,169
5/87 11,424 14,276 10,314 11,144
6/87 11,725 15,072 10,355 11,276
7/87 11,881 15,798 10,386 11,301
8/87 12,037 16,351 10,428 11,271
9/87 11,773 16,067 10,469 11,131
10/87 10,503 12,570 10,501 11,462
11/87 10,321 11,498 10,543 11,531
12/87 10,483 12,447 10,564 11,643
1/88 11,082 12,950 10,606 11,932
2/88 11,324 13,491 10,617 12,058
3/88 11,225 13,155 10,648 12,007
4/88 11,236 13,279 10,702 11,987
5/88 11,178 13,321 10,734 11,929
6/88 11,582 14,026 10,777 12,124
7/88 11,582 13,950 10,820 12,088
8/88 11,476 13,412 10,852 12,103
9/88 11,713 14,070 10,907 12,313
10/88 12,004 14,436 10,939 12,483
11/88 11,835 14,163 10,972 12,375
12/88 11,887 14,499 11,005 12,388
1/89 12,315 15,530 11,049 12,511
2/89 12,216 15,081 11,082 12,458
3/89 12,338 15,526 11,138 12,516
4/89 12,674 16,304 11,216 12,769
5/89 12,984 16,876 11,272 13,015
6/89 13,109 16,893 11,294 13,347
7/89 13,691 18,386 11,339 13,618
8/89 13,918 18,671 11,339 13,434
9/89 13,893 18,699 11,362 13,499
10/89 13,688 18,228 11,419 13,782
11/89 13,881 18,529 11,453 13,919
12/89 13,989 19,079 11,499 13,959
1/90 13,414 17,766 11,602 13,873
2/90 13,389 17,917 11,649 13,924
3/90 13,493 18,501 11,695 13,941
4/90 13,227 18,004 11,731 13,895
5/90 13,931 19,660 11,754 14,192
6/90 14,072 19,660 11,825 14,379
7/90 14,058 19,558 11,884 14,581
8/90 13,492 17,713 11,979 14,528
9/90 13,317 16,971 12,063 14,658
10/90 13,440 16,858 12,147 14,861
11/90 13,836 17,867 12,171 15,086
12/90 14,098 18,484 12,220 15,294
1/91 14,446 19,251 12,269 15,451
2/91 15,031 20,546 12,281 15,546
3/91 15,282 21,159 12,281 15,631
4/91 15,282 21,165 12,318 15,792
5/91 15,535 21,982 12,355 15,881
6/91 15,013 21,112 12,380 15,893
7/91 15,572 22,059 12,404 16,065
8/91 15,944 22,492 12,442 16,370
9/91 16,073 22,240 12,479 16,648
10/91 16,247 22,505 12,504 16,838
11/91 16,262 21,517 12,554 17,035
12/91 17,084 24,092 12,592 17,449
1/92 16,895 23,613 12,604 17,282
2/92 16,792 23,839 12,629 17,335
3/92 16,652 23,487 12,680 17,266
4/92 16,845 24,142 12,705 17,421
5/92 17,275 24,166 12,731 17,681
6/92 17,208 23,934 12,769 17,935
7/92 17,717 24,877 12,807 18,280
8/92 17,673 24,280 12,833 18,466
9/92 17,853 24,688 12,858 18,721
10/92 17,671 24,740 12,910 18,496
11/92 18,019 25,489 12,936 18,421
12/92 18,460 25,925 12,962 18,658
1/93 18,859 26,107 12,987 19,005
2/93 19,319 26,381 13,026 19,285
3/93 19,814 27,053 13,052 19,356
4/93 19,614 26,366 13,105 19,507
5/93 19,753 26,965 13,131 19,454
6/93 20,225 27,181 13,144 19,736
7/93 20,381 27,037 13,157 19,776
8/93 20,960 27,967 13,183 20,071
9/93 21,230 27,880 13,197 20,153
10/93 21,387 28,421 13,263 20,201
11/93 20,882 28,054 13,289 20,102
12/93 21,062 28,525 13,316 20,185
1/94 21,664 29,452 13,329 20,385
2/94 21,127 28,569 13,369 20,105
3/94 20,377 27,455 13,396 19,812
4/94 20,377 27,770 13,423 19,683
5/94 20,410 28,115 13,436 19,697
6/94 20,146 27,572 13,476 19,701
7/94 20,511 28,441 13,517 19,959
8/94 20,677 29,510 13,571 20,017
9/94 20,386 28,920 13,598 19,850
10/94 20,235 29,524 13,612 19,854
11/94 19,832 28,358 13,625 19,767
12/94 19,939 28,917 13,652 19,832
1/95 20,250 29,619 13,693 20,156
2/95 20,856 30,689 13,734 20,545
3/95 21,071 31,726 13,762 20,658
4/95 21,456 32,614 13,817 20,897
5/95 22,190 33,798 13,858 21,487
6/95 22,188 34,745 13,872 21,624
7/95 22,860 35,849 13,900 21,635
8/95 23,214 35,839 13,914 21,812
9/95 23,646 37,498 13,928 21,958
10/95 23,379 37,311 13,970 22,200
11/95 24,468 38,840 13,970 22,471
12/31/95 24,948 39,745 13,970 22,693
</TABLE>
22
<PAGE>
NORTHSTAR ADVANTAGE INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 28.71%
CHEMICALS - 0.88%
Atlantic Richfield Co., 6,000 $ 664,500
------------
CONSUMER NONDURABLES - 1.10%
Procter & Gamble Co. 10,000 830,000
------------
FINANCIAL SERVICES - 6.94%
Allmerica Financial Corp. 100,500 2,713,500
Allstate Corp. 20,000 822,500
Finova Group, Inc. 35,000 1,688,750
------------
5,224,750
------------
FOREST & PAPER PRODUCTS - 2.19%
Buckeye Cellulose Corp. (1) 75,000 1,650,000
------------
HEALTHCARE\PHARMACEUTICAL - 5.67%
Bristol-Myers, Squibb Co. 10,000 858,750
Merck & Co., Inc. 20,000 1,315,000
U.S. Healthcare, Inc. 45,000 2,092,500
------------
4,266,250
------------
OIL & GAS - 4.19%
Amoco Corp. 9,000 646,875
KN Energy, Inc. 40,000 1,165,000
Mobil Corp 12,000 1,344,000
------------
3,155,875
------------
REAL ESTATE INVESTMENT TRUST - 5.93%
Health and Retirement Property Trust 42,000 682,500
Health Care Property Investors, Inc. 32,000 1,124,000
Meditrust 25,000 871,875
National Health Investors, Inc. 27,150 899,344
Nationwide Health Properties, Inc. 21,000 882,000
------------
4,459,719
------------
TEXTILES - 1.81%
Interface, Inc. 80,000 1,360,000
------------
TOTAL COMMON STOCK
(cost $17,179,304) 21,611,094
------------
CONVERTIBLE PREFERRED STOCK - 27.97%
AIRLINES - 2.12%
Continental Air Finance Group, 8.50% (2) 30,000 1,597,500
------------
CHEMICALS - 3.64%
Atlantic Richfield Co., 9.00% 80,000 1,880,000
Corning Delaware LP, 6.00% 17,000 856,375
------------
2,736,375
------------
COMPUTER SERVICES - 3.21%
General Motors Corp.,
Class E, $3.25 33,000 2,417,250
------------
</TABLE>
23
<PAGE>
NORTHSTAR ADVANTAGE INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Shares/Principal
Security Amount Value
- ------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES - 4.19%
Jefferson-Pilot Corp., 7.25% 10,000 $ 731,250
United Companies Financial Corp., 6.75% 48,000 2,424,000
------------
3,155,250
------------
FOREST & PAPER PRODUCTS - 2.43%
International Paper Capital Trust, 5.25% (2) 40,000 1,827,000
------------
INDUSTRIAL SERVICES - 2.29%
Browning-Ferris Industries, Inc., 7.25% 55,000 1,725,625
------------
INSURANCE - 2.51%
Alexander & Alexander Services, Inc., $3.625 (2) 39,200 1,886,892
------------
METALS & MINING - 2.28%
Pittston Mineral Group, 6.25%, (2) 44,000 1,717,584
------------
OIL & GAS - 5.30%
Tejas Gas Corp., 5.25% 30,000 1,425,000
Unocal Corp., 7.00% (2) 46,300 2,563,168
------------
3,988,168
------------
TOTAL CONVERTIBLE PREFERRED STOCK
(cost $20,489,894) 21,051,644
------------
CORPORATE BONDS - 23.91%
AIRLINES - 3.75%
AMR Corp.
9.00%, Debentures, 8/01/12 $ 2,500,000 2,820,125
------------
BROADCASTING - 2.95%
TCI Communications, Inc.
8.75%, Sr. Debentures, 8/01/15 2,000,000 2,217,440
------------
FINANCIAL SERVICES - 4.97%
Jet Equipment Trust
9.71%, Subordinated Notes, 2/15/15 (2) 3,400,000 3,743,400
------------
FOREST & PAPER PRODUCTS - 2.72%
Buckeye Cellulose Corp.
8.50%, Sr. Subordinated Notes, 12/15/05 2,000,000 2,050,000
------------
HEALTHCARE\PHARMACEUTICAL - 2.70%
Universal Health Services, Inc.
8.75%, Sr. Notes, 8/15/05 2,000,000 2,035,000
------------
MEDIA & COMMUNICATION - 3.41%
Time Warner, Inc.
9.15%, Debentures, 2/01/23 2,250,000 2,569,950
------------
TEXTILES - 3.41%
Interface, Inc.
9.50%, Sr. Subordinated Notes, 11/15/05 (2) 2,500,000 2,562,500
------------
TOTAL CORPORATE BONDS
(cost $17,147,533) 17,998,415
------------
</TABLE>
24
<PAGE>
NORTHSTAR ADVANTAGE INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Principal
Security Amount Value
- ------------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS - 19.22%
AUTOMOTIVE - 4.61%
MascoTech, Inc.
4.50%, Subordinated Debentures, 12/15/03 $ 4,430,000 $ 3,466,475
------------
DIVERSIFIED MANUFACTURING - 3.66%
Gencorp, Inc.
8.00%, Subordinated Debentures, 8/01/02 2,750,000 2,750,825
------------
FINANCIAL SERVICES - 2.45%
American Travellers Corp.
6.50%, Subordinated Debentures, 10/01/05 1,350,000 1,840,401
------------
HEALTHCARE\PHARMACEUTICAL - 4.40%
Roche Holdings, Inc.
0%, Liquid Yield Option Notes, 4/20/10 (2)(3) 7,500,000 3,309,375
------------
INSURANCE - 1.80%
Equitable Companies, Inc.
6.125%, Subordinated Debentures, 12/15/24 1,200,000 1,357,956
------------
OIL & GAS - 0.56%
Pogo Producing Co.
5.50%, Subordinated Notes, 3/15/04 300,000 418,980
------------
TECHNOLOGY - 0.73%
Thermo Electron Corp.
4.25%, Subordinated Debentures, 1/01/03 (2) 500,000 548,750
------------
TELECOMMUNICATIONS - 1.01%
California Microwave, Inc.
5.25%, Subordinated Notes, 12/15/03 905,000 762,462
------------
TOTAL CONVERTIBLE CORPORATE BONDS
(cost $13,525,511) 14,455,224
------------
TOTAL INVESTMENT SECURITIES - 99.81%
(cost $68,342,242) 75,116,377
Other assets less liabilities - 0.19% 141,890
------------
Net Assets - 100.00% $ 75,258,267
------------
------------
</TABLE>
(1) Non-income producing security.
(2) Sale restricted to qualified institutional investors.
(3) Foreign denominated securities.
See accompanying notes to financial statements.
25
<PAGE>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
[PHOTO][LOGO]
PRESCOTT B. CROCKER ROBERT L. THOMAS
INVESTMENT ENVIRONMENT
THE MARKETS
- The year 1995 was extraordinarily good for the stock market. The S&P
500 index gained 34.1%.
- Stock prices responded to strong corporate earnings increases,
sharply lower interest rates, and the outlook for an extended
economic expansion.
- In late 1995 a slowing in global economic activity lead to inventory
corrections and reduced expectations for an increasing number of
companies. This along with federal budget uncertainties has caused
some increased price volatility.
THE FUND
- The Fund's return of 24.4% (T shares), in 1995 compared to 30.82% for
the Lipper Growth Fund Index. Most of the shortfall relative to the
broad averages occurred in the first quarter when Latin American
stocks declined sharply and unfounded fears of recession weighed
heavily on the cyclically sensitive holdings.
- Very strong gains were achieved in a variety of well capitalized,
high quality stocks such as Fannie Mae, Pfizer, Boeing, Texas
Instruments, British Sky Broadcasting and Philip Morris.
- Underperforming areas such as consumer durables were sold early in
the year. Technology, which was very strong at mid-year, was cut back
and finished 1995 with disappointing returns. Basic materials were
sold and technology cut back after mid-year while additions were made
to more consistent growers in consumer staples, energy, and financial
services.
CURRENT STRATEGY
- We continue to expect positive results for stocks in 1996. Slow
economic growth should continue in the first half but strengthen
later in the year because of low interest rates and more simulative
monetary policy. Stock prices look attractive relative to interest
rates. The major stock indices should appreciate by 5-10% supported
by modest earnings growth. Selective individual stocks should benefit
from superior growth in earnings, global competitive strength, large
stock buy backs, and substantial dividend increases.
- Stocks with long term consistent growth prospects have received more
emphasis with the largest holdings in consumer staples/health,
financial and energy. Technology was adjusted early in January to
emphasize consistent growth issues. Cash reserves were raised
slightly to be deployed opportunistically.
---------------------------------------------------------------------------
FUND INFORMATION (ALL DATA IS AS OF 12/31/95)
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 EQUITY HOLDINGS
<S> <C> <C> <C>
NAME % FUND
1. Intel 4.0%
2. Philip Morris 3.6
3. WorldCom 3.3
4. Merck 3.2
5. Fannie Mae 3.1
6. National Semi 2.9
7. BankAmerica 2.8
8. Home Depot 2.8
9. Citicorp 2.7
10. Bristol Myers 2.6
---
31.0%
<CAPTION>
5 TOP SECTORS
SECTORS % FUND
<S> <C> <C> <C>
1. Consumer
Staples 22.1%
2. Technology 18.7
3. Financial 17.6
4. Energy 11.1
5. Capital Goods 7.4
---
76.9%
<CAPTION>
ASSET ALLOCATION
<S> <C> <C> <C>
Common Stock 94.9%
Convertible 4.9
</TABLE>
26
<PAGE>
NORTHSTAR ADVANTAGE GROWTH FUND
[LOGO]
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NORTHSTAR
ADVANTAGE GROWTH
FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH CLASS OF SHARES THROUGH
THE FUND'S FISCAL YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended December
31, 1995, with all distributions reinvested in shares. The average annualized
total return for Class A shares of 11.18% for the period since the classes'
inception on June 5, 1995 reflects payment of the maximum sales charge of 4.75%.
Average annualized total returns of 12.34% and 18.75% since inception on June 5,
1995 for Class B and Class C shares, respectively, and total annual returns
since inception on February 3, 1986 of 11.08% for Class T shares, reflect
applicable contingent deferred sales charges (maximum contingent deferred sales
charge for Class B of 5.00% declines to 0% and Class T shares of 4.00% declines
to 0% after five years; and maximum charge for Class C shares is 1.00% during
the first year of investment only). All performance data shown represents past
performance, and should not be considered indicative of future performance.
NORTHSTAR ADVANTAGE GROWTH FUND -- CLASS A
NORTHSTAR ADVANTAGE GROWTH FUND -- CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
CLASS A S & P 500 CPI
6/05/95 9,525 10,000 10,000
6/30/95 9,866 10,280 10,010
7/31/95 10,333 10,607 10,030
8/31/95 10,321 10,604 10,040
9/30/95 10,555 11,095 10,050
10/31/95 10,310 11,039 10,080
11/30/95 10,635 11,492 10,080
12/31/95 10,623 11,760 10,080
CLASS B S & P 500 CPI
6/05/95 10,000 10,000 10,000
6/30/95 9,850 10,280 10,010
7/31/95 10,340 10,607 10,030
8/31/95 10,322 10,604 10,040
9/30/95 10,556 11,095 10,050
10/31/95 10,299 11,039 10,080
11/30/95 10,636 11,492 10,080
12/31/95 10,686 11,760 10,080
</TABLE>
NORTHSTAR ADVANTAGE GROWTH FUND -- CLASS C
NORTHSTAR ADVANTAGE GROWTH FUND -- CLASS T
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
CLASS C S & P 500 CPI
6/05/95 10,000 10,000 10,000
6/30/95 10,253 10,280 10,010
7/31/95 10,737 10,607 10,030
8/31/95 10,720 10,604 10,040
9/30/95 10,887 11,095 10,050
10/31/95 10,699 11,039 10,080
11/30/95 11,036 11,492 10,080
12/31/95 11,029 11,760 10,080
CLASS T S & P 500 CPI
2/03/86 10,000 10,000 10,000
2/86 10,310 10,715 9,980
3/86 10,750 11,377 9,920
4/86 10,580 11,217 9,880
5/86 11,041 11,780 9,910
6/86 11,110 12,045 9,950
7/86 10,285 11,338 9,960
8/86 10,995 12,145 9,970
9/86 10,454 11,208 10,010
10/86 10,865 11,821 10,030
11/86 11,096 12,075 10,050
12/86 10,895 11,833 10,090
1/87 11,966 13,393 10,150
2/87 12,441 13,887 10,191
3/87 12,741 14,356 10,232
4/87 12,641 14,191 10,283
5/87 12,869 14,276 10,314
6/87 13,345 15,072 10,355
7/87 13,831 15,798 10,386
8/87 14,110 16,351 10,428
9/87 13,903 16,067 10,469
10/87 10,893 12,570 10,501
11/87 10,241 11,498 10,543
12/87 10,904 12,447 10,564
1/88 11,403 12,950 10,606
2/88 11,851 13,491 10,617
3/88 11,675 13,155 10,648
4/88 11,769 13,279 10,702
5/88 11,665 13,321 10,734
6/88 12,052 14,026 10,777
7/88 12,041 13,950 10,820
8/88 11,841 13,412 10,852
9/88 12,282 14,070 10,907
10/88 12,640 14,436 10,939
11/88 12,461 14,163 10,972
12/88 12,725 14,499 11,005
1/89 13,481 15,530 11,049
2/89 13,322 15,081 11,082
3/89 13,520 15,526 11,138
4/89 14,037 16,304 11,216
5/89 14,640 16,876 11,272
6/89 14,343 16,893 11,294
7/89 15,483 18,386 11,339
8/89 15,843 18,671 11,339
9/89 15,919 18,699 11,362
10/89 15,440 18,228 11,419
11/89 15,744 18,529 11,453
12/89 15,811 19,079 11,499
1/90 14,567 17,766 11,602
2/90 14,818 17,917 11,649
3/90 15,480 18,501 11,695
4/90 14,746 18,004 11,731
5/90 16,293 19,660 11,754
6/90 16,269 19,660 11,825
7/90 16,073 19,558 11,884
8/90 14,730 17,713 11,979
9/90 13,853 16,971 12,063
10/90 13,830 16,858 12,147
11/90 14,474 17,867 12,171
12/90 14,982 18,484 12,220
1/91 15,869 19,251 12,269
2/91 17,140 20,546 12,281
3/91 17,589 21,159 12,281
4/91 17,530 21,165 12,318
5/91 18,227 21,982 12,355
6/91 17,338 21,112 12,380
7/91 18,362 22,059 12,404
8/91 18,880 22,492 12,442
9/91 18,663 22,240 12,479
10/91 19,171 22,505 12,504
11/91 18,795 21,517 12,554
12/91 20,688 24,092 12,592
1/92 20,497 23,613 12,604
2/92 20,549 23,839 12,629
3/92 20,113 23,487 12,680
4/92 20,493 24,142 12,705
5/92 20,708 24,166 12,731
6/92 19,948 23,934 12,769
7/92 20,619 24,877 12,807
8/92 20,303 24,280 12,833
9/92 20,492 24,688 12,858
10/92 20,959 24,740 12,910
11/92 22,160 25,489 12,936
12/92 22,351 25,925 12,962
1/93 22,091 26,107 12,987
2/93 22,118 26,381 13,026
3/93 22,857 27,053 13,052
4/93 22,297 26,366 13,105
5/93 22,968 26,965 13,131
6/93 23,055 27,181 13,144
7/93 23,083 27,037 13,157
8/93 24,061 27,967 13,183
9/93 23,960 27,880 13,197
10/93 24,320 28,421 13,263
11/93 24,016 28,054 13,289
12/93 24,854 28,525 13,316
1/94 25,657 29,452 13,329
2/94 24,941 28,569 13,369
3/94 23,452 27,455 13,396
4/94 23,668 27,770 13,423
5/94 23,696 28,115 13,436
6/94 22,691 27,572 13,476
7/94 23,511 28,441 13,517
8/94 24,489 29,510 13,571
9/94 23,879 28,920 13,598
10/94 23,764 29,524 13,612
11/94 22,928 28,358 13,625
12/94 22,948 28,917 13,652
1/95 22,935 29,619 13,693
2/95 23,517 30,689 13,734
3/95 24,049 31,726 13,762
4/95 24,837 32,614 13,817
5/95 25,466 33,798 13,858
6/95 26,579 34,745 13,872
7/95 27,822 35,849 13,900
8/95 27,778 35,839 13,914
9/95 28,395 37,498 13,928
10/95 27,736 37,311 13,970
11/95 28,585 38,840 13,970
12/31/95 28,550 39,745 13,970
</TABLE>
27
<PAGE>
NORTHSTAR ADVANTAGE GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 97.35%
AEROSPACE - 0.69%
Boeing Co. 7,000 $ 548,625
------------
AUTOMOTIVE - 1.52%
Magna International, Inc. 28,000 1,211,000
------------
BANKING - 8.44%
Ahmanson (H.F.) & Co. 50,000 1,325,000
BankAmerica Corp. 35,000 2,266,250
Citicorp 32,300 2,172,175
Mellon Bank Corp. 18,000 967,500
------------
6,730,925
------------
BROADCASTING & CABLE - 1.80%
British Sky Broadcast Group PLC (1) 20,000 752,500
Source Media, Inc. 75,000 684,375
------------
1,436,875
------------
BUSINESS SERVICES - 3.29%
H & R Block, Inc. 37,500 1,518,750
Reuters Holdings PLC (1) 20,000 1,102,500
------------
2,621,250
------------
CHEMICALS - 0.99%
Air Products and Chemical, Inc. 15,000 791,250
------------
COMPUTER SERVICES - 2.41%
General Motors Corp.
Class E 37,000 1,924,000
------------
COSMETICS - 0.49%
Estee Lauder Companies, Inc. (2) 11,300 394,088
------------
ELECTRICAL EQUIPMENT - 5.22%
AMP, Inc. 48,000 1,842,000
General Electric Co. 20,000 1,440,000
Illinois Tool Works, Inc. 15,000 885,000
------------
4,167,000
------------
ELECTRONICS - 3.63%
DSC Communications Corp. (2) 54,500 2,009,687
LSI Logic Corp. (2) 27,000 884,250
------------
2,893,937
------------
FINANCIAL SERVICES - 8.06%
Dean Witter, Discover & Co. 30,000 1,410,000
Federal National Mortgage Association 20,000 2,482,500
MBNA Corp. 30,000 1,106,250
MGIC Investment Corp. 26,300 1,426,775
------------
6,425,525
------------
FOOD, BEVERAGE & TOBACCO - 6.56%
PanAmerican Beverages, Inc. 38,000 1,216,000
Pepsico, Inc. 20,000 1,117,500
Philip Morris Cos., Inc. 32,000 2,896,000
------------
5,229,500
------------
</TABLE>
28
<PAGE>
NORTHSTAR ADVANTAGE GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE/ PHARMACEUTICAL - 11.62%
Abbott Laboratories 20,000 $ 835,000
Bristol-Myers, Squibb Co. 24,000 2,061,000
Merck & Co., Inc. 39,000 2,564,250
Pfizer, Inc. 30,000 1,890,000
Pharmacia & Upjohn, Inc. 49,500 1,918,125
------------
9,268,375
------------
HOUSEHOLD PRODUCTS - 1.87%
Procter & Gamble Co. 18,000 1,494,000
------------
INSURANCE - 1.45%
American International Group, Inc. 12,500 1,156,250
------------
LEISURE - 1.16%
Cedar Fair LP 25,000 925,000
------------
MACHINERY - 1.65%
Deere & Co. 18,000 634,500
Kennametal, Inc. 21,500 682,625
------------
1,317,125
------------
OFFICE EQUIPMENT - 1.55%
Xerox Corp. 9,000 1,233,000
------------
OIL & GAS - 11.31%
Amoco Corp. 24,000 1,725,000
El Paso Natural Gas Co. 40,000 1,135,000
ENI SpA (1) 30,000 1,027,500
Enron Oil And Gas Co. 40,000 960,000
Royal Dutch Petroleum Co. 10,000 1,411,250
Schlumberger Ltd. 26,000 1,800,500
Sonat, Inc. 27,000 961,875
------------
9,021,125
------------
PAPER & FOREST PRODUCTS - 0.65%
Kimberly-Clark Corp. 6,240 516,360
------------
RAILROADS & EQUIPMENT - 1.43%
Canadian National Railway Co. (3) 20,000 300,000
Conrail, Inc. 12,000 840,000
------------
1,140,000
------------
RETAIL & WHOLESALE - 3.73%
Home Depot, Inc. 46,000 2,202,250
Pep Boys-Manny, Moe & Jack 30,000 768,750
------------
2,971,000
------------
TECHNOLOGY - 9.99%
Applied Materials, Inc. (2) 26,000 1,023,750
Compaq Computer Corp. (2) 30,500 1,464,000
Intel Corp. 56,000 3,178,000
National Semiconductor Corp. (2) 103,400 2,300,650
------------
7,966,400
------------
</TABLE>
29
<PAGE>
NORTHSTAR ADVANTAGE GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Shares/Principal
Security Amount Value
- ------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS - 6.38%
Alltel Corp. 39,000 $ 1,150,500
GTE Corp. 29,000 1,276,000
WorldCom, Inc. (2) 75,500 2,661,375
------------
5,087,875
------------
WIRELESS COMMUNICATION - 1.46%
Nokia Corp. (1) 30,000 1,166,250
------------
TOTAL COMMON STOCKS
(cost $70,572,746) 77,636,735
------------
CONVERTIBLE PREFERRED STOCK - .51%
HOUSEHOLD PRODUCTS - 0.51%
Amway Japan Ltd. (1) 20,900 407,550
------------
TOTAL CONVERTIBLE PREFERRED STOCK
(cost $400,444) 407,550
------------
CONVERTIBLE BONDS - 1.97%
GAMING - 1.14%
Argosy Gaming Corp.
12.00%, Subordinated Notes, 6/01/01 $ 1,000,000 907,500
------------
HEALTHCARE - 0.83%
Roche Holdings, Inc.
0%, Liquid Yield Option Notes, 4/20/10 (3) (4) 1,500,000 661,875
------------
TOTAL CONVERTIBLE BONDS
(cost $1,671,980) 1,569,375
------------
TOTAL INVESTMENT SECURITIES - 99.83%
(cost $72,645,170) 79,613,660
REPURCHASE AGREEMENT - 1.84%
Agreement with State Street Bank and Trust
bearing interest at 5.25% dated 12/29/95 to be
repurchased 1/02/96 at $1,469,857 and
collateralized by $1,465,000 U.S. Treasury Notes,
6.875% due 10/31/96, value $1,499,638 (cost
$1,469,643) 1,469,000 1,469,643
Liabilities in excess of other assets - (1.67)% (1,330,250)
------------
Net Assets - 100.00% $ 79,753,053
------------
------------
</TABLE>
(1) American Depositary Receipts.
(2) Non-income producing securities.
(3) Foreign securities.
(4) Convertible into a 144A American Depository shares.
See accompanying notes to financial statements.
30
<PAGE>
NORTHSTAR ADVANTAGE SPECIAL FUND
[PHOTO][LOGO]
ROBERT L. THOMAS
INVESTMENT ENVIRONMENT
THE MARKETS
- Prices of both stocks and bonds performed admirably in 1995, with the
Dow Jones Industrial Average providing a total return of 33.4% and
the long-term U.S. Treasuries returning 29.95%. Each of those rates
was more than three times historic average returns.
- For common stock owners, 1995 provided a year of sharply rising
corporate profit margins on quite modest sales gains. Bond-holders
were beneficiaries of the continuing positive news on inflation at a
point so far enough along in the economic recovery that "overheating"
would have come as no surprise.
- At year-end, signs of an economic slowdown were abundant, and prompt
action by the Federal Reserve to stimulate the economy was a
reasonable expectation. With or without that stimulus, smaller sales
and profit gains are likely this year. On the other hand, we expect
significant increases in corporate dividends and still lower interest
rates to offset any disappointment in earnings reports.
THE FUND
- Effective February 1, 1996, Navellier Fund Management, Inc. will
assume day to day investment management of the Fund's portfolio
pursuant to a Subadvisory Agreement with the Fund's Adviser approved
by shareholders at a meeting held on January 30, 1996.
- The Special Fund's return of 11.34% (T shares), lagged the indicies
and most other funds in the "small cap" category. While the return
was actually higher than average historic returns for stocks, it was
a year when more exceptional returns were commonplace. The Fund's
five-year average annual return of 18.1%, although below the average
for all small cap funds, places the Fund among the top 14% of funds
in the Lipper universe.
- The Fund's performance reflected its relatively small commitments to
the technology sector in the first half of the year, modest holdings
in financial services stock which did well as interest rates
continued to fall; and oversized holdings in consumer-related stocks
which performed poorly through much of the year.
- In the course of the year, we increased the Fund's liquidity by
buying larger companies then we have in the past. In each of the past
two years, larger companies have outperformed small companies -
perhaps because individuals are increasingly buying funds which favor
larger companies rather than individual stocks, and also perhaps
because the huge flood of new issues of small companies has created
an imbalance in supply and demand. We continue to believe that small
companies provide exceptional value to the patient investor.
---------------------------------------------------------------------------
FUND INFORMATION (ALL DATA IS AS OF 12/31/95)
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
<S> <C> <C> <C>
NAME % FUND
1. NFO Research 4.3%
2. Comair 3.6
3. MEMC 3.5
4. Oak Tech 3.4
5. WorldCom 2.8
6. Daka Int'l 2.8
7. Vicor 2.7
8. Fresenius 2.7
9. Paging Network 2.6
10. Cambridge 2.3
---
30.7%
<CAPTION>
5 TOP INDUSTRIES
SECTORS % FUND
<S> <C> <C> <C>
1. Technology 18.2%
2. Airlines 8.6
3. Computer
Software 8.1
4. Business
Services 7.5
5. Consumer
Nondur. 6.7
---
49.1%
<CAPTION>
ASSET ALLOCATION
<S> <C> <C> <C>
Common Stock 91.3%
Convertible 2.5
</TABLE>
31
<PAGE>
NORTHSTAR ADVANTAGE SPECIAL FUND
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NORTHSTAR
ADVANTAGE SPECIAL
FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH CLASS OF SHARES THROUGH
THE FUND'S FISCAL YEAR END.
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data is supplied for the fiscal year ended December
31, 1995, with all distributions reinvested in shares. The average annualized
total return for Class A shares of 12.32% for the period since the classes'
inception on June 5, 1995 reflects payment of the maximum sales charge of 4.75%.
Average annualized total returns of 12.22% and 19.70% since inception on June 5,
1995 for Class B and Class C shares, respectively, and total annual returns
since inception on February 3, 1986 of 9.42% for Class T shares, reflect
applicable contingent deferred sales charges (maximum contingent deferred sales
charge for Class B of 5.00% declines to 0% and Class T shares of 4.00% declines
to 0% after five years; and maximum charge for Class C shares is 1.00% during
the first year of investment only). All performance data shown represents past
performance, and should not be considered indicative of future performance.
NORTHSTAR ADVANTAGE SPECIAL FUND -- CLASS A
NORTHSTAR ADVANTAGE SPECIAL FUND -- CLASS B
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
CLASS A RUSSELL 2000 CPI
6/05/95 9,525 10,000 10,000
6/30/95 10,231 10,949 10,010
7/31/95 10,708 12,198 10,030
8/31/95 10,864 12,681 10,040
9/30/95 10,888 13,138 10,050
10/31/95 10,431 11,821 10,080
11/30/95 10,717 12,855 10,080
12/31/95 10,686 13,528 10,080
CLASS B RUSSELL 2000 CPI
6/05/95 10,000 10,000 10,000
6/30/95 10,247 10,949 10,010
7/31/95 10,732 12,198 10,030
8/31/95 10,886 12,681 10,040
9/30/95 10,911 13,138 10,050
10/31/95 10,420 11,821 10,080
11/30/95 10,712 12,855 10,080
12/31/95 10,679 13,528 10,080
</TABLE>
NORTHSTAR ADVANTAGE SPECIAL FUND -- CLASS C
NORTHSTAR ADVANTAGE SPECIAL FUND -- CLASS T
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
CLASS C RUSSELL 2000 CPI
6/05/95 10,000 10,000 10,000
6/30/95 10,641 10,949 10,010
7/31/95 11,132 12,198 10,030
8/31/95 11,286 12,681 10,040
9/30/95 11,306 13,138 10,050
10/31/95 10,820 11,821 10,080
11/30/95 11,117 12,855 10,080
12/31/95 11,079 13,528 10,080
CLASS T RUSSELL 2000 CPI
2/03/86 10,000 10,000 10,000
2/86 10,190 10,000 9,980
3/86 10,330 10,470 9,920
4/86 10,349 10,621 9,880
5/86 10,369 10,994 9,910
6/86 10,119 10,964 9,950
7/86 9,419 9,830 9,960
8/86 9,488 10,122 9,970
9/86 9,089 9,468 10,010
10/86 9,289 9,820 10,030
11/86 9,139 9,771 10,050
12/86 8,919 9,475 10,090
1/87 9,739 10,516 10,150
2/87 10,289 11,438 10,191
3/87 10,259 11,758 10,232
4/87 9,809 11,344 10,283
5/87 9,719 11,280 10,314
6/87 9,849 11,577 10,355
7/87 10,198 11,962 10,386
8/87 10,488 12,371 10,428
9/87 10,418 12,069 10,469
10/87 7,569 7,571 10,501
11/87 7,488 7,219 10,543
12/87 7,898 7,665 10,564
1/88 8,158 7,927 10,606
2/88 8,498 8,538 10,617
3/88 8,608 8,905 10,648
4/88 8,987 9,085 10,702
5/88 8,887 8,850 10,734
6/88 9,598 9,473 10,777
7/88 9,428 9,378 10,820
8/88 9,328 9,103 10,852
9/88 9,508 9,319 10,907
10/88 9,358 9,197 10,939
11/88 9,227 8,856 10,972
12/88 9,548 9,192 11,005
1/89 10,127 9,615 11,049
2/89 9,977 9,664 11,082
3/89 10,157 9,893 11,138
4/89 10,847 10,367 11,216
5/89 11,266 10,871 11,272
6/89 11,047 10,555 11,294
7/89 11,496 11,085 11,339
8/89 12,016 11,375 11,339
9/89 11,976 11,376 11,362
10/89 11,486 10,510 11,419
11/89 11,567 10,563 11,453
12/89 11,666 10,573 11,499
1/90 10,826 9,445 11,602
2/90 10,996 9,743 11,649
3/90 11,566 10,152 11,695
4/90 11,316 9,752 11,731
5/90 12,675 10,500 11,754
6/90 13,095 10,516 11,825
7/90 12,605 9,949 11,884
8/90 11,255 8,396 11,979
9/90 10,116 7,636 12,063
10/90 9,866 7,208 12,147
11/90 10,416 7,651 12,171
12/90 10,635 7,906 12,220
1/91 11,315 8,577 12,269
2/91 12,465 9,540 12,281
3/91 13,174 10,284 12,281
4/91 13,224 10,256 12,318
5/91 13,934 10,818 12,355
6/91 12,964 9,994 12,380
7/91 13,843 10,360 12,404
8/91 14,753 10,825 12,442
9/91 14,912 10,907 12,479
10/91 15,802 11,279 12,504
11/91 14,883 10,592 12,554
12/91 16,725 11,611 12,592
1/92 17,841 12,863 12,604
2/92 17,798 13,410 12,629
3/92 16,915 12,701 12,680
4/92 15,799 12,030 12,705
5/92 15,862 12,224 12,731
6/92 15,479 11,368 12,769
7/92 16,213 11,859 12,807
8/92 15,777 11,359 12,833
9/92 16,053 11,692 12,858
10/92 17,180 12,187 12,910
11/92 18,561 13,477 12,936
12/92 19,155 14,164 12,962
1/93 19,805 14,876 12,987
2/93 19,034 14,277 13,026
3/93 19,971 14,965 13,052
4/93 19,266 14,272 13,105
5/93 20,081 15,234 13,131
6/93 20,015 15,361 13,144
7/93 20,411 15,698 13,157
8/93 21,391 16,782 13,183
9/93 22,415 17,587 13,197
10/93 23,088 18,365 13,263
11/93 22,483 17,222 13,289
12/93 23,020 18,221 13,316
1/94 23,816 19,245 13,329
2/94 23,650 19,110 13,369
3/94 22,519 17,150 13,396
4/94 22,299 17,330 13,423
5/94 21,955 16,928 13,436
6/94 20,871 15,849 13,476
7/94 21,202 16,273 13,517
8/94 22,687 17,804 13,571
9/94 23,052 17,653 13,598
10/94 22,586 17,515 13,612
11/94 21,301 16,177 13,625
12/94 21,900 16,877 13,652
1/95 21,276 16,457 13,693
2/95 21,722 17,591 13,734
3/95 22,057 18,115 13,762
4/95 21,320 18,809 13,817
5/95 21,710 19,354 13,858
6/95 23,428 21,191 13,872
7/95 24,487 23,609 13,900
8/95 24,832 24,544 13,914
9/95 24,876 25,427 13,928
10/95 23,817 22,880 13,970
11/95 24,465 24,879 13,970
12/31/95 24,384 26,183 13,970
</TABLE>
32
<PAGE>
NORTHSTAR ADVANTAGE SPECIAL FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 91.31%
AIRLINES - 6.53%
America West Airlines, Inc. 40,000 $ 680,000
Atlantic Coast Airlines, Inc. 30,000 307,500
Comair Holdings, Inc. 50,000 1,343,750
Greenwich Air Service, Inc. 5,000 115,000
------------
2,446,250
------------
AUTOMOTIVE - 2.46%
Cherry Corp. (1) 20,000 195,000
Lear Seating Corp. (1) 25,000 725,000
------------
920,000
------------
BROADCASTING & MEDIA - 2.36%
Spelling Entertainment Group, Inc. 25,000 312,500
Viacom, Inc. (1) 6,061 287,140
Young Broadcasting, Inc. 10,000 282,500
------------
882,140
------------
BUSINESS SERVICES - 7.48%
Bell & Howell Holdings Co. (1) 12,500 350,000
Cambridge Technology Partners, Inc. (1) 15,000 862,500
NFO Research, Inc. (1) 60,000 1,590,000
------------
2,802,500
------------
CAPITAL GOODS - 1.36%
AGCO Corp. 10,000 510,000
------------
COMMUNICATIONS - 5.42%
Paging Network, Inc. (1) 40,000 975,000
WorldCom, Inc. 30,000 1,057,500
------------
2,032,500
------------
COMPUTER HARDWARE - 2.47%
Encad, Inc. (1) 20,000 350,000
Mylex Corp. (1) 30,000 573,750
------------
923,750
------------
COMPUTER SOFTWARE - 8.14%
Macromedia, Inc. (1) 15,000 783,750
Progress Software Corp. (1) 20,000 750,000
Sanctuary Woods Multimedia Corp. 100,000 287,500
Software 2000, Inc. 100,000 775,000
Systemsoft Corp. (1) 40,000 450,000
------------
3,046,250
------------
CONSUMER NONDURABLES - 6.22%
Cinram Ltd. (2) 30,000 551,995
De Rigo SpA (3) 25,000 568,750
Mattel, Inc. 24,901 765,706
Safety 1st, Inc. (1) 30,000 442,500
------------
2,328,951
------------
CONSUMER SERVICES - 1.09%
Team Rental Group, Inc. (1) 48,000 408,000
------------
</TABLE>
33
<PAGE>
NORTHSTAR ADVANTAGE SPECIAL FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES - 2.75%
20th Century Industries 30,000 $ 596,250
Surety Capital Corp. (1) 124,000 434,000
------------
1,030,250
------------
FOOD & BEVERAGE - 0.92%
Pepsi-Cola Puerto Rico Bottling Co. 30,000 345,000
------------
HEALTHCARE - 5.80%
Elan PLC (1)(3) 15,000 729,375
Fresenius USA, Inc. (1) 50,000 993,750
TECNOL Medical Products, Inc. (1) 25,000 450,000
------------
2,173,125
------------
INDUSTRIAL MANUFACTURING - 5.25%
CasTech Aluminum Group, Inc. (1) 28,700 387,450
Greenfield Industries, Inc. 25,000 781,250
Haskel International, Inc. 20,000 117,500
Thermo Fibertek, Inc. (1) 30,000 678,750
------------
1,964,950
------------
OIL & GAS - 3.77%
Barrett Resources Corp. (1) 20,000 587,500
Smith International, Inc. 35,000 822,500
------------
1,410,000
------------
PACKAGING - 0.85%
Brockway Standard Holdings Corp. (1) 20,000 317,500
------------
RESTAURANTS - 4.06%
Daka International, Inc 38,400 1,056,000
Italian Oven, Inc. 60,000 465,000
------------
1,521,000
------------
RETAIL - 4.77%
Department 56, Inc. (1) 15,000 575,625
Dollar General Corp. 19,531 405,268
Zale Corp. (1) 50,000 806,250
------------
1,787,143
------------
TECHNOLOGY - 18.18%
General Scanning, Inc. 40,000 400,000
Marshall Industries (1) 15,000 481,875
MEMC Electronic Materials, Inc. 40,000 1,305,000
Molex, Inc. 18,750 574,219
Oak Technology, Inc. (1) 30,000 1,267,500
Rainbow Technologies, Inc. 25,000 540,625
SDL, Inc. 20,000 480,000
Smart Modular Technologies, Inc. 10,000 106,250
Trimble Navigation Ltd. (1) 35,000 651,875
Vicor Corp. (1) 50,000 1,000,000
------------
6,807,344
------------
TRANSPORTATION - 1.43%
Swift Transportation Corp. (1) 35,000 533,750
------------
TOTAL COMMON STOCK
(cost $27,096,147) 34,190,403
------------
</TABLE>
34
<PAGE>
NORTHSTAR ADVANTAGE SPECIAL FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Principal
Security Amount Value
- ------------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE BONDS - 2.47%
AIRLINES - 2.03%
Greenwich Air Services, Inc.
8.00%, Subordinated Debentures, 11/15/00 $ 400,000 $ 761,000
------------
CONSUMER NONDURABLES - 0.44%
Roadmaster Industries, Inc.
8.00%, Subordinated Debentures, 8/15/03 200,000 164,500
------------
TOTAL CONVERTIBLE BONDS
(cost $635,000) 925,500
------------
TOTAL INVESTMENT SECURITIES - 93.78%
(cost $27,731,147) 35,115,903
REPURCHASE AGREEMENT - 5.54%
Agreement with State Street Bank and Trust
bearing interest at 5.25% dated 12/29/95 to be
repurchased 1/02/96 at $2,073,209 and
collateralized
by $2,065,000 U.S. Treasury Notes, 6.875% due
10/31/96,
value $2,113,824 (cost $2,072,907) 2,072,000 2,072,907
Other assets less liabilities - 0.68% 256,180
------------
Net Assets - 100.00% $ 37,444,990
------------
------------
</TABLE>
(1) Non-income producing security.
(2) Foreign denominated securities.
(3) American Depositary Receipt.
See accompanying notes to financial statements.
35
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Northstar Northstar
Advantage Advantage Northstar Northstar Northstar Northstar
Government Strategic Advantage Advantage Advantage Advantage
Securities Income High Yield Income Growth Special
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------
ASSETS:
Investments in securities, at value (cost
$146,502,019, $70,951,380, $169,134,498, $68,342,242,
$72,645,170 and $27,731,147, respectively) $156,009,943 $71,502,037 $169,064,242 $75,116,377 $79,613,660 $35,115,903
Repurchase agreements 3,595,572 3,226,411 8,112,548 0 1,469,643 2,072,907
Cash 815 705 659 1,097,446 1,917 196
Dividends and interest receivable 633,756 1,631,855 3,784,598 852,842 184,573 19,113
Receivable for shares of beneficial interest sold 225,782 415,826 1,669,367 36,254 159,610 33,867
Prepaid expenses 6,306 85,213 8,360 5,573 724 4,458
Due from advisor 0 7,304 0 0 0 733
Receivable for investments sold 0 0 10,000 0 0 387,500
------------------------------------------------------------------------
Total Assets 160,472,174 76,869,351 182,649,774 77,108,492 81,430,127 37,634,677
------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 2,963,438 0 1,915,000 500,000 0 0
Dividend payable 283,587 319,269 719,805 1,203,338 1,456,891 98,895
Distribution fee payable 85,112 50,687 103,502 48,715 64,954 29,344
Investment advisory fee payable 58,821 43,920 67,238 42,128 51,812 24,128
Payable for shares of beneficial interest reacquired 25,863 56,606 71,128 11,511 46,668 464
Accounting and custodian fee payable 13,873 12,868 19,168 13,516 16,416 7,897
Accrued expenses 58,231 52,577 104,197 31,017 40,333 28,959
------------------------------------------------------------------------
Total Liabilities 3,488,925 535,927 3,000,038 1,850,225 1,677,074 189,687
------------------------------------------------------------------------
NET ASSETS $156,983,249 $76,333,424 $179,649,736 $75,258,267 $79,753,053 $37,444,990
------------------------------------------------------------------------
NET ASSETS WERE COMPOSED OF:
Shares of beneficial interest, $.01 par value
outstanding
(unlimited shares authorized), $173,066,366 $78,628,070 $188,493,927 $68,394,138 $72,762,775 $30,060,234
Undistributed net investment income (loss) (328,169) 104,844 (37,974) (50,342) (27,666) 0
Accumulated net realized gain (loss) on investments,
foreign currency, options, and futures (25,262,872) (2,413,429) (8,735,961) 140,336 49,454 0
Net unrealized appreciation (depreciation) of
investments and foreign currency 9,507,924 13,939 (70,256) 6,774,135 6,968,490 7,384,756
------------------------------------------------------------------------
Net Assets $156,983,249 $76,333,424 $179,649,736 $75,258,267 $79,753,053 $37,444,990
------------------------------------------------------------------------
CLASS A:
Net Assets $3,234,699 $21,790,419 $7,466,081 $796,886 $1,354,561 $2,335,103
------------------------------------------------------------------------
Shares outstanding 321,185 1,757,737 872,019 63,584 87,218 111,604
------------------------------------------------------------------------
Net asset value and redemption value per share
(net assets/shares outstanding) $10.07 $12.40 $8.56 $12.53 $15.53 $20.92
------------------------------------------------------------------------
Maximum offering price per share (net asset value
plus sales charge of 4.75% of offering price) $10.57 $13.02 $8.99 $13.15 $16.30 $21.96
------------------------------------------------------------------------
CLASS B:
Net Assets $2,789,619 $22,142,826 $29,062,558 $1,759,236 $1,986,942 $1,490,929
------------------------------------------------------------------------
Shares outstanding 276,968 1,786,800 3,392,409 140,614 128,174 71,553
------------------------------------------------------------------------
Net asset value and offering price per share $10.07 $12.39 $8.57 $12.51 $15.50 $20.84
------------------------------------------------------------------------
CLASS C:
Net Assets $7,573 $2,171,805 $3,410,152 $230,585 $68,902 $61,753
------------------------------------------------------------------------
Shares outstanding 752 175,474 398,145 18,424 4,445 2,963
------------------------------------------------------------------------
Net asset value and offering price per share $10.07 $12.38 $8.57 $12.52 $15.50 $20.84
------------------------------------------------------------------------
CLASS T:
Net Assets $150,951,358 $30,228,374 $139,710,945 $72,471,560 $76,342,648 $33,557,205
------------------------------------------------------------------------
Shares outstanding 14,993,613 2,439,270 16,315,322 5,779,671 4,917,043 1,610,464
------------------------------------------------------------------------
Net asset value and offering price per share $10.07 $12.39 $8.56 $12.54 $15.53 $20.84
------------------------------------------------------------------------
</TABLE>
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
Northstar Northstar Northstar
Advantage Advantage Advantage Northstar Northstar Northstar
Government Strategic High Advantage Advantage Advantage
Securities Income Yield Income Growth Special
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of withholding
taxes $0, $0, $0, $1,447,
$18,573 and $0, respectively) -- $31,371 $555,999 $1,831,989 $1,329,626 $142,461
Interest (net of withholding
taxes $0, $10,163, $31,854, $0,
$0 and $0, respectively) $11,347,423 3,805,526 16,157,384 2,662,506 546,337 113,192
---------------------------------------------------------------
Total investment income 11,347,423 3,836,897 16,713,383 4,494,495 1,875,963 255,653
---------------------------------------------------------------
EXPENSES:
Investment advisory and
management fees 980,772 252,201 683,323 477,095 593,282 287,311
Distribution fees
Class A 1,392 15,416 7,358 835 2,523 3,463
Class B 6,354 40,187 59,176 5,264 5,718 5,097
Class C 32 3,773 8,287 449 245 283
Class T 973,588 278,019 927,236 544,122 737,831 347,851
Transfer agent fees and expenses
Class A 522 9,786 2,741 353 1,406 1,105
Class B 649 6,398 5,537 623 609 399
Class C 4 460 837 38 37 30
Class T 90,322 19,557 98,363 60,531 71,362 45,637
Printing and postage expenses 20,426 15,265 27,529 8,874 11,651 5,691
Registration fees 17,588 28,854 28,267 19,541 17,919 19,431
Accounting and Custodian fees 81,209 67,047 96,884 74,361 78,042 55,625
Audit fees 30,013 11,167 27,168 13,080 14,506 11,817
Directors 19,122 15,058 18,772 15,878 16,361 23,849
Legal fees 8,221 3,964 8,652 1,408 5,148 3,443
Insurance 25,039 4,599 23,405 11,361 16,742 7,913
Organization 0 21,167 0 0 0 0
Miscellaneous expenses 5,944 12,939 8,652 989 4,117 3,628
---------------------------------------------------------------
2,261,197 805,857 2,032,187 1,234,802 1,577,499 822,573
Less expenses reimbursed/waived
by management company 301,776 87,944 0 0 0 733
---------------------------------------------------------------
Total expenses 1,959,421 717,913 2,032,187 1,234,802 1,577,499 821,840
---------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 9,388,002 3,118,984 14,681,196 3,259,693 298,464 (566,187)
---------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain(loss) on
investments 10,033,763 657,579 (5,577,338) 6,842,914 16,582,023 1,862,208
Net realized gain(loss) on
foreign currency 0 (15,982) (61,890) 0 (27,666) 21
Net realized loss on options and
futures 0 (84,957) 0 0 0 0
Net change in unrealized
appreciation of investments 11,830,566 1,109,531 9,968,024 6,328,209 160,556 2,669,199
Net change in unrealized
appreciation of foreign
currency 0 13,355 0 0 0 0
---------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 21,864,329 1,679,526 4,328,796 13,171,123 16,714,913 4,531,428
---------------------------------------------------------------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $31,252,331 $4,798,510 $19,009,992 $16,430,816 $17,013,377 $3,965,241
---------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
37
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
Northstar Northstar Northstar
Advantage Advantage Advantage
Government Strategic High
Securities Income Yield
Fund Fund Fund
---------------------- ---------------------- ----------------------
1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $9,388,002 $9,969,143 $3,118,984 $709,465 $14,681,196 $12,572,129
Net realized gain (loss) on
investments 10,033,763 (16,686,437) 657,579 107,862 (5,577,338) (3,158,623)
Net realized loss on foreign currency 0 0 (15,982) 0 (61,890) 0
Net realized loss on options and
futures 0 0 (84,957) 0 0 0
Net change in unrealized appreciation
(depreciation) of investments 11,830,566 (11,609,888) 1,109,531 (573,620) 9,968,024 (12,836,963)
Net change in unrealized appreciation
of foreign currency 0 0 13,355 0 0 0
---------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations 31,252,331 (18,327,182) 4,798,510 243,707 19,009,992 (3,423,457)
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (31,103) 0 (382,101) 0 (238,931) 0
Class B (34,991) 0 (315,465) 0 (537,227) 0
Class C (156) 0 (29,224) 0 (76,102) 0
Class T (9,374,624) (10,141,623) (2,318,425) (709,465) (13,814,466) (12,847,877)
In excess of net investment income (328,169) (48,535) 0 (31,758) (37,974) 0
Net realized gain from investments 0 0 0 (96,195) 0 (90,444)
Tax return of capital 0 (175,125) 0 0 0 0
---------------------------------------------------------------------
Total distributions (9,769,043) (10,365,283) (3,045,215) (837,418) (14,704,700) (12,938,321)
---------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 9,486,902 21,123,034 15,818,725 26,116,925 54,017,286 43,821,554
Net proceeds from merger (note 8) 0 0 45,577,269 0 0 0
Net asset value of shares issued to
shareholders in reinvestment of
dividends 6,083,503 6,296,992 1,467,264 488,237 7,796,432 7,185,417
---------------------------------------------------------------------
15,570,405 27,420,026 62,863,258 26,605,162 61,813,718 51,006,971
Cost of shares redeemed (32,678,732) (30,274,780) (13,535,436) (859,152) (22,895,030) (23,314,935)
---------------------------------------------------------------------
Net increase (decrease) in net assets
derived from capital share
transactions (17,108,327) (2,854,754) 49,327,822 25,746,010 38,918,688 27,692,036
---------------------------------------------------------------------
Net increase (decrease) in net assets 4,374,961 (31,547,219) 51,081,117 25,152,299 43,223,980 11,330,258
NET ASSETS:
Beginning of period 152,608,288 184,155,507 25,252,307 100,008 136,425,756 125,095,498
End of period (including undistributed
(overdistributed) net investment
income: $(328,169), $0; $104,844,
$24,028,
---------------------------------------------------------------------
$(37,974) and $47,420, respectively) $156,983,249 $152,608,288 $76,333,424 $25,252,307 $179,649,736 $136,425,756
---------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
38
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
[LOGO]
<TABLE>
<CAPTION>
Northstar Northstar Northstar
Advantage Advantage Advantage
Income Growth Special
Fund Fund Fund
---------------------- ---------------------- ----------------------
1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------
FROM OPERATIONS:
Net investment income (loss) $3,259,693 $3,482,966 $298,464 $394,554 $(566,187) $(446,594)
Net realized gain on investments 6,842,914 1,000,270 16,582,023 656,441 1,862,208 267,480
Net realized gain (loss) on foreign
currency 0 0 (27,666) 0 21 0
Net change in unrealized appreciation
of investments 6,328,209 (8,922,243) 160,556 (7,523,774) 2,669,199 (1,674,276)
---------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations 16,430,816 (4,439,007) 17,013,377 (6,472,779) 3,965,241 (1,853,390)
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (16,747) 0 (5,272) 0 0 0
Class B (35,496) 0 (330) 0 0 0
Class C (3,103) 0 (5) 0 0 0
Class T (3,228,817) (3,524,386) (265,197) (414,465) 0 0
Distributions in excess of net
investment income (50,342) (100,848) (27,660) 0 0 0
Net realized gain from investments (6,865,265) (956,639) (16,582,008) (702,318) (1,761,465) (267,480)
Tax return of capital 0 0 0 (104,514) 0 0
---------------------------------------------------------------------
Total distributions (10,199,770) (4,581,873) (16,880,472) (1,221,297) (1,761,465) (267,480)
---------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 4,370,028 10,355,024 10,998,087 12,408,096 8,290,445 17,069,716
Net asset value of shares issued to
shareholders in reinvestment of
dividends 8,536,854 3,770,123 15,393,542 1,098,246 1,662,683 254,328
---------------------------------------------------------------------
12,906,882 14,125,147 26,391,629 13,506,342 9,953,128 17,324,044
Cost of shares redeemed (17,643,533) (12,181,158) (23,161,995) (10,180,895) (13,560,271) (5,193,117)
---------------------------------------------------------------------
Net increase (decrease) in net assets
derived from capital share
transactions (4,736,651) 1,943,989 3,229,634 3,325,447 (3,607,143) 12,130,927
---------------------------------------------------------------------
Net increase (decrease) in net assets 1,494,395 (7,076,891) 3,362,539 (4,368,629) (1,403,367) 10,010,057
NET ASSETS:
Beginning of period 73,763,872 80,840,763 76,390,514 80,759,143 38,848,357 28,838,300
End of period (including undistributed
(overdistributed) net investment
income: $(50,342), $24,470;
$(27,666), $0,
---------------------------------------------------------------------
$0 and $0, respectively) $75,258,267 $73,763,872 $79,753,053 $76,390,514 $37,444,990 $38,848,357
---------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT
EACH PERIOD
<TABLE>
<CAPTION>
Net
realized
& Dividends Distributions
Net Asset unrealized declared declared Net Asset
Value, Net gain (loss) Total from from net from net Distributions Value,
Period beginning investment on investment investment realized from Total end of Total
ended of period income investments operations income gain Capital Distributions period Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Government Securities Fund, Class A
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 $9.51 $0.34 $0.59 $0.93 ($0.37) -- -- ($0.37) $10.07 10.04%
Government Securities Fund, Class B
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 9.51 0.30 0.59 0.89 (0.33) -- -- (0.33) 10.07 9.61
Government Securities Fund, Class C
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 9.51 0.30 0.59 0.89 (0.33) -- -- (0.33) 10.07 9.61
Government Securities Fund, Class T
- ----------------------------------------------------------------------------------------------------------------------------------
12/31/95 8.74 0.58 1.35 1.93 (0.60) -- -- (0.60) 10.07 22.90
12/31/94 10.32 0.56 (1.56) (1.00) (0.57) -- (0.01) (0.58) 8.74 (9.82)
12/31/93 9.22 0.59 1.09 1.68 (0.58) -- -- (0.58) 10.32 18.48
12/31/92 8.99 0.61 0.23 0.84 (0.61) -- -- (0.61) 9.22 9.77
12/31/91 8.47 0.67 0.52 1.19 (0.67) -- -- (0.67) 8.99 14.73
12/31/90 8.47 0.68 -- 0.68 (0.68) -- -- (0.68) 8.47 8.57
Strategic Income Fund, Class A
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 12.24 0.63 0.13 0.76 (0.60) -- -- (0.60) 12.40 6.40
Strategic Income Fund, Class B
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 12.24 0.55 0.15 0.70 (0.55) -- -- (0.55) 12.39 5.89
Strategic Income Fund, Class C
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 12.24 0.55 0.14 0.69 (0.55) -- -- (0.55) 12.38 5.81
Strategic Income Fund, Class T
- ----------------------------------------------------------------------------------------------------------------------------------
12/31/95 11.71 0.98 0.66 1.64 (0.96) -- -- (0.96) 12.39 14.54
7/01/94-
12/31/94 12.00 0.51 (0.25) 0.26 (0.49) (0.05) (0.01) (0.55) 11.71 2.14
High Yield Fund, Class A
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 8.68 0.48 (0.10) 0.38 (0.50) -- -- (0.50) 8.56 4.48
High Yield Fund, Class B
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 8.68 0.44 (0.09) 0.35 (0.46) -- -- (0.46) 8.57 4.17
High Yield Fund, Class C
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 8.68 0.44 (0.09) 0.35 (0.46) -- -- (0.46) 8.57 4.17
High Yield Fund, Class T
- ----------------------------------------------------------------------------------------------------------------------------------
12/31/95 8.29 0.84 0.26 1.10 (0.83) -- -- (0.83) 8.56 13.71
12/31/94 9.31 0.81 (0.99) (0.18) (0.83) (0.01) -- (0.84) 8.29 (2.18)
12/31/93 9.09 0.85 0.80 1.65 (0.83) (0.60) -- (1.43) 9.31 18.89
12/31/92 7.94 0.92 1.19 2.11 (0.94) (0.02) -- (0.96) 9.09 27.57
12/31/91 6.27 1.08 1.67 2.75 (1.08) -- -- (1.08) 7.94 46.49
12/31/90 8.55 1.12 (2.30) (1.18) (1.10) -- -- (1.10) 6.27 (14.59)
<CAPTION>
Ratio of
net
Net Ratio of Ratio of investment
Assets, expenses expense income to
end of to average reimbursement average
Period period net to average net Portfolio
ended (000's) assets(1) net assets(1) assets(1) turnover
<S> <C> <C> <C> <C> <C>
- ---------
- ---------
6/05/95
12/31/95 $3,235 1.02% 0.20% 6.01% 295%
- ---------
6/05/95
12/31/95 2,790 1.70 0.20 5.20 295
- ---------
6/05/95
12/31/95 8 1.68 0.20 5.28 295
- ---------
12/31/95 150,951 1.30 0.20 6.23 295
12/31/94 152,608 1.29 0.20 6.00 315
12/31/93 184,156 1.31 0.20 5.83 81
12/31/92 144,144 1.39 0.20 6.81 120
12/31/91 121,389 1.44 0.20 7.68 87
12/31/90 108,420 1.43 0.20 8.23 17
- ---------
6/05/95
12/31/95 21,790 1.36 0.07 7.03 153
- ---------
6/05/95
12/31/95 22,143 2.06 0.06 6.47 153
- ---------
6/05/95
12/31/95 2,172 2.02 0.06 6.48 153
- ---------
12/31/95 30,228 1.90 0.28 6.86 153
7/01/94
12/31/94 25,252 1.90 0.63 7.92 156
- ---------
6/05/95
12/31/95 7,466 1.02 -- 9.83 103
- ---------
6/05/95
12/31/95 29,063 1.71 -- 9.18 103
- ---------
6/05/95
12/31/95 3,410 1.72 -- 9.29 103
- ---------
12/31/95 139,711 1.33 -- 9.69 103
12/31/94 136,426 1.34 -- 9.08 86
12/31/93 125,095 1.40 -- 8.84 176
12/31/92 64,063 1.50 0.05 10.3 122
12/31/91 25,651 1.50 0.46 14.84 57
12/31/90 11,342 1.44 0.81 15.15 156
</TABLE>
(1) Annualized
40
<PAGE>
NORTHSTAR ADVANTAGE FUNDS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT
EACH PERIOD
[LOGO]
<TABLE>
<CAPTION>
Net
realized
& Dividends Distributions
Net Asset unrealized declared declared Net Asset
Value, Net gain (loss) Total from from net from net Distributions Value,
Period beginning investment on investment investment realized from Total end of Total
ended of period income investments operations income gain Capital Distributions period Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratio of
net
Net Ratio of Ratio of investment
Assets, expenses expense income to
end of to average reimbursement average
Period period net to average net Portfolio
ended (000's) assets(1) net assets(1) assets(1) turnover
<S> <C> <C> <C> <C> <C>
- ---------
Income Fund, Class A
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 $12.77 $0.43 $1.06 $1.49 ($0.48) ($1.25) -- ($1.73) $12.53 11.95%
Income Fund, Class B
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 12.77 0.35 1.09 1.44 (0.45) (1.25) -- (1.70) 12.51 11.56
Income Fund, Class C
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 12.77 0.38 1.07 1.45 (0.45) (1.25) -- (1.70) 12.52 11.49
Income Fund, Class T
- ----------------------------------------------------------------------------------------------------------------------------------
12/31/95 11.54 0.57 2.27 2.84 (0.59) (1.25) -- (1.84) 12.54 25.11
12/31/94 12.94 0.57 (1.25) (0.68) (0.54) (0.16) (0.02) (0.72) 11.54 (5.33)
12/31/93 12.05 0.49 1.20 1.69 (0.49) (0.31) -- (0.80) 12.94 14.08
12/31/92 11.66 0.55 0.36 0.91 (0.52) -- -- (0.52) 12.05 8.06
12/31/91 10.13 0.57 1.53 2.10 (0.57) -- -- (0.57) 11.66 21.17
12/31/90 10.71 0.61 (0.54) 0.07 (0.63) -- (0.02) (0.65) 10.13 0.78
Growth Fund, Class A
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 17.59 0.08 1.95 2.03 (0.10) (3.99) -- (4.09) 15.53 11.55
Growth Fund, Class B
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 17.59 0.06 1.92 1.98 (0.08) (3.99) -- (4.07) 15.50 11.27
Growth Fund, Class C
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 17.59 0.04 1.92 1.96 (0.06) (3.99) -- (4.05) 15.50 11.17
Growth Fund, Class T
- ----------------------------------------------------------------------------------------------------------------------------------
12/31/95 15.75 0.07 3.77 3.84 (0.07) (3.99) -- (4.06) 15.53 24.40
12/31/94 17.33 0.08 (1.41) (1.33) (0.08) (0.15) (0.02) (0.25) 15.75 (7.66)
12/31/93 16.36 0.02 1.67 1.69 (0.04) (0.67) (0.01) (0.72) 17.33 10.36
12/31/92 16.37 0.02 1.30 1.32 (0.02) (1.31) -- (1.33) 16.36 8.05
12/31/91 12.49 0.09 4.62 4.71 (0.08) (0.75) -- (0.83) 16.37 38.10
12/31/90 13.85 0.10 (0.83) (0.73) (0.10) (0.51) (0.02) (0.63) 12.49 (5.24)
Special Fund, Class A
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 19.56 (0.09) 2.48 2.39 -- (1.03) -- (1.03) 20.92 12.20
Special Fund, Class B
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 19.56 (0.12) 2.43 2.31 -- (1.03) -- (1.03) 20.84 11.79
Special Fund, Class C
- ----------------------------------------------------------------------------------------------------------------------------------
6/05/95-
12/31/95 19.56 (0.15) 2.46 2.31 -- (1.03) -- (1.03) 20.84 11.79
Special Fund, Class T
- ----------------------------------------------------------------------------------------------------------------------------------
12/31/95 19.64 (0.34) 2.57 2.23 -- (1.03) -- (1.03) 20.84 11.34
12/31/94 20.79 (0.25) (0.76) (1.01) -- (0.14) -- (0.14) 19.64 (4.86)
12/31/93 17.40 (0.32) 3.83 3.51 -- (0.12) -- (0.12) 20.79 20.16
12/31/92 15.74 (0.33) 2.61 2.28 -- (0.62) -- (0.62) 17.40 14.54
12/31/91 10.64 (0.21) 6.24 6.03 -- (0.93) -- (0.93) 15.74 57.27
12/31/90 11.67 (0.20) (0.83) (1.03) -- -- -- -- 10.64 (8.83)
<CAPTION>
- ---------
6/05/95
12/31/95 $797 1.27% -- 4.99% 131%
- ---------
6/05/95
12/31/95 1,759 1.95 -- 4.38 131
- ---------
6/05/95
12/31/95 231 1.91 -- 4.49 131
- ---------
12/31/95 72,472 1.68 -- 4.44 131
12/31/94 73,764 1.69 -- 4.36 59
12/31/93 80,841 1.77 -- 3.99 38
12/31/92 56,823 2.02 -- 4.73 59
12/31/91 49,367 2.06 -- 5.21 77
12/31/90 44,750 2.10 -- 5.73 57
- ---------
6/05/95
12/31/95 1,355 1.42 -- 0.63 134
- ---------
6/05/95
12/31/95 1,987 2.07 -- 0.06 134
- ---------
6/05/95
12/31/95 69 2.11 -- 0.02 134
- ---------
12/31/95 76,343 2.00 -- 0.37 134
12/31/94 76,391 2.00 -- 0.49 54
12/31/93 80,759 2.04 -- 0.13 42
12/31/92 56,759 2.15 -- 0.09 47
12/31/91 40,884 2.25 -- 0.66 64
12/31/90 24,927 2.33 -- 0.80 54
- ---------
6/05/95
12/31/95 2,335 1.50 -- (0.91) 71
- ---------
6/05/95
12/31/95 1,491 2.20 0.01 (1.64) 71
- ---------
6/05/95
12/31/95 62 2.20 0.03 (1.60) 71
- ---------
12/31/95 33,557 2.16 -- (1.50) 71
12/31/94 38,848 2.16 -- (1.25) 39
12/31/93 28,838 2.34 -- (1.66) 35
12/31/92 11,336 2.84 -- (2.12) 40
12/31/91 5,480 2.95 0.74 (1.57) 85
12/31/90 3,024 2.95 2.03 (0.97) 72
</TABLE>
(1) Annualized
41
<PAGE>
THE NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization - Northstar Advantage Government Securities Fund, Northstar
Advantage Strategic Income Fund, Northstar Advantage High Yield Fund, Northstar
Advantage Income Fund, Northstar Advantage Growth Fund and Northstar Advantage
Special Fund (the "Funds") are organized under the laws of the Commonwealth of
Massachusetts and registered under the Investment Company Act of 1940 as
diversified open-end management investment companies. Each is a separate
investment company with its own investment objective and specific investment
goals set forth below:
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND ("Government Securities
Fund") seeks to achieve a high level of current income and to conserve principal
by investing in debt obligations issued or guaranteed by the U.S. Government or
its agencies and instrumentalities.
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND ("Strategic Income Fund") seeks to
achieve high current income by allocating its investments among the following
three sectors of the fixed income securities markets: debt obligations of the
U.S. Government, its agencies and instrumentalities: high yield-high risk,
lower-rated and nonrated U.S. and foreign fixed income securities, and
investment grade debt obligations of foreign governments, their agencies and
instrumentalities.
NORTHSTAR ADVANTAGE HIGH YIELD FUND ("High Yield Fund") seeks high current
income through investment primarily in long-term and intermediate-term fixed
income securities, with emphasis on high yield-high risk, lower-rated and
nonrated corporate debt instruments.
NORTHSTAR ADVANTAGE INCOME FUND ("Income Fund") seeks to realize income and
secondarily, capital appreciation. This Fund invests in a balance of debt
securities, common and preferred stocks, and debt securities and preferred
stocks convertible into common stock.
NORTHSTAR ADVANTAGE GROWTH FUND ("Growth Fund") seeks to achieve long-term
growth of capital through investment principally in common stocks and, to a
lesser extent, it may also invest in preferred stocks and convertible
securities.
NORTHSTAR ADVANTAGE SPECIAL FUND ("Special Fund") seeks to achieve capital
appreciation through investment in a diversified portfolio of equity securities
selected for their potential for growth. The Fund invests primarily in smaller,
lesser-known companies that may be subject to greater price volatility than more
mature companies.
Management's use of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date(s) of financial statements and the reported amounts of
income and expenses during the reporting period(s). Actual results could differ
from those estimates.
Security Valuation - Equity securities are valued at the closing sale prices
reported on recognized securities exchanges or lacking any sales, at the last
available bid price. Prices of long-term debt securities are valued on the basis
of last reported sales price, or if no sales are reported, the value is
determined based upon the mean of representative quoted bid or asked prices for
such securities, or, if such prices are not available, at prices provided by
market makers, or at prices for securities of comparable maturity, quality and
type. Short-term debt instruments with remaining maturities of less than 60 days
are valued at amortized cost, unless the Trustees determine that amortized cost
does not reflect the fair value of such obligations. Securities for which market
quotations are not readily available are valued at fair value determined in good
faith by or under direction of the Trustees. The books and records of the Funds
are maintained in U.S. dollars. Securities quoted in foreign currencies are
translated into U.S. dollars based on the prevailing exchange rates on that day.
The Adviser uses independent pricing services to price the Funds' securities.
Security Transactions, Investment Income, Expenses and Distributions to
Shareholders - Security transactions are recorded on the trade date. Realized
gains or losses on sales of investments are calculated on the identified cost
basis. Interest income is recorded on the accrual basis except when collection
is not expected; discounts are accrued, and premiums amortized to par at
maturity; dividend income is recorded on the ex-dividend dates. Income, expenses
(except class specific expenses), and realized/unrealized gains/losses, are
allocated proportionately to each class of shares based upon the relative net
asset value of outstanding shares. Dividends from net investment income are
declared and paid monthly by the Government Securities, Strategic Income and
High Yield Funds, declared and paid quarterly by the Income Fund and Special
Fund and declared and paid annually by the Growth Fund. Distributions of net
realized capital gains, if any, are declared annually; however, to the extent
that a net realized capital gain can
42
<PAGE>
THE NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
[LOGO]
be reduced by a capital loss carryover, such gain will not be distributed.
Net realized and unrealized gain (loss) on foreign currency transactions
represents the foreign exchange:
(1) gains and losses from the sale of holdings of foreign currencies, (2)
gains and losses between trade date and settlement date on investment securities
transactions and forward exchange contracts, and (3) gains and losses from the
difference between amounts of interest and dividends recorded and the amounts
actually received.
The Funds may periodically make reclassifications among certain of their
capital accounts as a result of the timing and characterization of certain
income and capital gains distributions determined annually in accordance with
federal tax regulations which may differ from generally accepted accounting
principles.
Forward Foreign Currency Contracts and Options - The Funds may enter into
forward foreign currency contracts ("contracts") to purchase or sell currencies
at a specified rate at a future date. The Funds may enter into these contracts
solely for hedging purposes.
The Funds write and purchase put and call options on foreign currencies. The
premium paid by the Funds for the purchase of a call or put option is recorded
as an investment and subsequently "marked-to-market" to reflect the current
market value of the option. If an option which the Funds have purchased expires
on the stipulated expiration date, the Funds realize a loss in the amount of the
cost of the option.
The amount of potential gain or loss to the Funds upon exercise of a written
call option is the value (in U.S. dollars) of the currency sold, less the value
of the U.S. dollars received in exchange. The amount of potential gain or loss
to the Funds upon exercise of a written put option is the value (in U.S.
dollars) of the currency received, less the value of the U.S. dollars paid in
exchange.
Risks may arise upon entering these contracts from the potential inability
of counterparties to meet the terms of their contract and from unanticipated
movement in the value of a foreign currency relative to the U.S. dollar.
Repurchase Agreements - The Funds' Custodian takes possession of collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a marked-to-market basis to assure that the value, including
accrued interest, is at least equal to the repurchase price. In the event of
default of the obligation to repurchase, the Funds have the right to liquidate
the collateral and apply the proceeds in satisfaction of the obligation. If the
seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Funds may be delayed or limited.
Federal Income Taxes - The Funds intend to comply with the special
provisions of the Internal Revenue Code available to investment companies and to
distribute all of the taxable net income to their respective shareholders.
Therefore, no Federal income tax provision or excise tax provision is required.
Organization Expenses - Organization expenses have been capitalized by the
Funds and amortized on a straight-line basis over a 60 month period from the
commencement of operations of each Fund. Costs incurred by the Strategic Income
Fund in connection with its organization and its original registration amounted
to $105,074.
NOTE 2. INVESTMENT ADVISER AND ADMINISTRATOR AND DISTRIBUTOR
NWNL Northstar, Inc. (and its wholly owned operating subsidiaries,
Northstar Investment Management Corp., Northstar Distributors, Inc. and
Northstar Administrator Corp.) is an 80% owned subsidiary of ReliaStar Financial
Corp.
Northstar Investment Management Corp. (the "Adviser") serves as each Fund's
investment adviser. Each Fund pays the Adviser an investment advisory fee
calculated at an annual rate of 0.45% of average daily net assets for High Yield
Fund, 0.65% of average daily net assets for the Government Securities, Strategic
Income and Income Funds, and 0.75% of average daily net assets for the Growth
and Special Funds. The Adviser has agreed to waive 0.20% of its advisory fee for
the Government Securities Fund through December 31, 1995 therefore the rate paid
equals 0.45% of average daily net assets. For the year ended December 31, 1995,
the Adviser waived $301,776 of advisory fees for the Government Securities Fund.
For the year ended December 31, 1995, the Funds paid combined advisory fees to
Boston Security Counselors, Inc. (the former adviser) and Northstar Investment
Management Corp. (the current adviser) of $3,273,984.
43
<PAGE>
THE NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
Northstar Administrators Corporation (the "Administrator") serves as
administrator to the Funds pursuant to an Administrative Services Agreement.
The Adviser has agreed that the fee of a Fund will be reduced, or the
Adviser will reimburse the Fund (up to the amount of its fee) by an amount
necessary to prevent the total expenses of the Fund (excluding taxes, interest,
brokerage commissions or transaction costs, certain distribution fees and
extraordinary expenses) from exceeding limits applicable to the Fund in any
state in which its shares then are qualified for sale. Currently, the most
restrictive annual expense limitation is 2.5% of the first $30,000,000 of
average net assets, 2.0% of the next $70,000,000 and 1.5% of the excess.
The Adviser has voluntarily undertaken to limit the expenses through
December 31, 1995 of the Strategic Income Fund to 1.2% (Class A), 1.9% (Class
B), 1.9% (Class C) and 1.29% (Class T) and of the Special Fund to 1.5% (Class
A), 2.2% (Class B & C), and 2.16 (Class T) of each respective class's average
net assets. The Adviser will reimburse the Funds for amounts in excess of such
limits, up to the total amount of fees received during the period. During the
year ended December 31, 1995, the Adviser's reimbursements aggregated $87,944
and $733 for the Strategic Income Fund and Special Fund, respectively.
Northstar Distributors, Inc. (the "Distributor") an affiliate of the Adviser
and the Administrator, is the distributor of each Fund's shares. Under separate
Plans of Distribution pertaining to Class A, Class B, Class C and Class T
shares, the Funds pay the Distributor monthly service fees at an annual rate of
0.25% of the average daily net assets in the case of Class A, Class B, Class C
and Class T shares, and monthly distribution fees at the annual rate of 0.05% of
the average daily net assets of Class A shares and 0.75% of the average daily
net assets of Class B and Class C shares for all Funds. Class T shares pay
monthly distribution fees at an annual rate of 0.40% of average daily net assets
for the Government Securities and High Yield Funds, 0.50% of average daily net
assets for the Income Fund and 0.65% of average daily net assets for the
Strategic Income, Growth and Special Funds. At December 31, 1995, the Funds owed
the Distributor $382,314 in service and distribution fees.
The Distributor also receives the proceeds of the initial sales charges paid
by shareholders upon the purchase of Class A shares, and the contingent deferred
sales charge paid by shareholders upon certain redemptions of Class A, Class B,
Class C and Class T shares. For the twelve months ended December 31, 1995, the
Distributor earned the following amounts in sales charges:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS T
SHARES SHARES SHARES SHARES
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Initial Sales
Charges $ 359,111 $ 0 $ 0 $ 0
Contingent
Deferred Sales
Charges $ 0 $ 25,864 $ 4,699 $1,164,912
</TABLE>
NOTE 3. ACQUISITION
On the close of business June 2, 1995, the Adviser completed the
acquisition of certain assets related to the mutual fund business of The Advest
Group, Inc. At the time of the transaction, the Funds entered into new
Investment Advisory Agreements, Distribution Agreements and Transfer Agency and
Service Agreements with new service providers, the terms and provisions of which
are substantially identical to the agreements with the former service providers.
NOTE 4. PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the year ended December 31, 1995, were as
follows:
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR
ADVANTAGE ADVANTAGE NORTHSTAR
GOVERNMENT STRATEGIC ADVANTAGE
SECURITIES INCOME HIGH YIELD
FUND FUND FUND
---------- ---------- ----------
<S> <C> <C> <C>
Aggregate Purchases $435,284,789 $103,412,467 $179,129,009
Aggregate Sales $440,568,347 $57,645,035 $149,037,583
</TABLE>
U.S. Government Securities included above were as follows:
<TABLE>
<S> <C> <C> <C>
Aggregate Purchases $435,284,789 $13,853,812 $6,775,781
Aggregate Sales $440,568,347 $12,304,156 $8,771,078
</TABLE>
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR NORTHSTAR
ADVANTAGE ADVANTAGE ADVANTAGE
INCOME GROWTH SPECIAL
FUND FUND FUND
---------- ---------- ----------
<S> <C> <C> <C>
Aggregate Purchases $92,115,139 $98,960,228 $26,310,256
Aggregate Sales $94,451,550 $105,559,381 $32,938,066
</TABLE>
U.S. Government Securities included above were as follows:
<TABLE>
<S> <C> <C> <C>
Aggregate Purchases $2,000,000 $1,883,200 $ 0
Aggregate Sales $10,367,352 $ 0 $ 0
</TABLE>
44
<PAGE>
THE NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
[LOGO]
For the year ended December 31, 1995, option transactions on foreign
currencies in the Funds were as follows:
<TABLE>
<CAPTION>
PREMIUMS
STRATEGIC INCOME FUND RECEIVED
-----------
<S> <C>
Call options outstanding at December 31,
1994 0
Call options written $ 28,880
Call options exercised (28,800)
-----------
Call options outstanding at December 31,
1995 $ 0
-----------
-----------
</TABLE>
NOTE 5. PORTFOLIO SECURITIES (TAX BASIS)
The cost of securities for federal income tax purposes and the aggregate
appreciation and depreciation of securities at December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR
ADVANTAGE ADVANTAGE NORTHSTAR
GOVERNMENT STRATEGIC ADVANTAGE
SECURITIES INCOME HIGH YIELD
FUND FUND FUND
---------- ---------- ----------
<S> <C> <C> <C>
Cost (tax basis) $146,502,019 $70,946,205 $169,134,498
---------- ---------- ----------
Appreciated
Securities 9,507,924 2,664,042 6,510,205
Depreciated
Securities 0 2,108,210 6,580,461
---------- ---------- ----------
Net Unrealized
Appreciation $9,507,924 $ 555,832 $ (70,256)
---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
NORTHSTAR NORTHSTAR NORTHSTAR
ADVANTAGE ADVANTAGE ADVANTAGE
INCOME GROWTH SPECIAL
FUND FUND FUND
---------- ---------- ----------
<S> <C> <C> <C>
Cost (tax basis) $68,342,244 $72,645,170 $27,731,147
---------- ---------- ----------
Appreciated
Securities 7,615,202 10,287,227 9,085,142
Depreciated
Securities 841,067 3,318,737 1,700,386
---------- ---------- ----------
Net Unrealized
Appreciation $6,774,135 $6,968,490 $7,384,756
---------- ---------- ----------
</TABLE>
45
<PAGE>
THE NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
NOTE 6. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of each Fund for the year ended December 31,
1995, were as follows:
<TABLE>
<CAPTION>
NORTHSTAR ADVANTAGE GOVERNMENT SECURITIES FUND
---------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
-------------------- -------------------- -------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- --------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 326,499 $3,175,556 278,689 $2,664,382 732 $ 6,973 403,851 $3,639,991
Reinvested dividends 3,398 32,936 3,358 32,382 20 190 649,744 6,017,995
Shares redeemed 8,712 83,280 5,079 50,119 0 0 3,526,879 32,545,333
--------- --------- --------- --------- --------- --------- --------- ----------
Net increase
(decrease) 321,185 $3,125,212 276,968 $2,646,645 752 $ 7,163 (2,473,284) $(22,887,347)
--------- --------- --------- --------- --------- --------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
NORTHSTAR ADVANTAGE STRATEGIC INCOME FUND
---------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
-------------------- -------------------- -------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- --------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 147,505 $2,139,353 492,026 $6,234,501 51,547 $ 652,909 565,764 $6,791,962
Issued in merger
(Note 8) 2,278,702 27,859,837 1,316,859 16,093,857 133,030 1,623,575 0 0
Reinvested dividends 9,752 119,651 9,167 112,921 517 6,349 101,327 1,228,343
Shares redeemed 678,222 8,374,357 31,251 383,568 9,620 118,119 384,285 4,659,392
--------- --------- --------- --------- --------- --------- --------- ----------
Net increase
(decrease) 1,757,737 $21,744,484 1,786,801 $22,057,711 175,475 $2,164,714 282,806 $3,360,913
--------- --------- --------- --------- --------- --------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
NORTHSTAR ADVANTAGE HIGH YIELD FUND
---------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
-------------------- -------------------- -------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- --------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 910,824 $7,850,386 3,422,451 $29,521,715 439,743 $3,740,733 1,518,926 $12,904,451
Reinvested dividends 21,104 181,582 24,757 213,414 2,911 25,009 862,636 7,376,428
Shares redeemed 59,909 516,072 54,799 471,184 44,509 326,267 2,517,197 21,581,507
--------- --------- --------- --------- --------- --------- --------- ----------
Net increase
(decrease) 872,019 $7,515,896 3,392,409 $29,263,945 398,145 $3,439,475 (135,635) $(1,300,628)
--------- --------- --------- --------- --------- --------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
NORTHSTAR ADVANTAGE INCOME FUND
---------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
-------------------- -------------------- -------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- --------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 61,555 $ 803,879 131,744 $1,730,774 16,525 $ 219,651 127,572 $1,615,724
Reinvested dividends 6,552 82,392 9,620 120,686 1,910 23,922 661,324 8,309,854
Shares redeemed 4,523 61,195 750 9,931 11 142 1,402,049 17,572,265
--------- --------- --------- --------- --------- --------- --------- ----------
Net increase
(decrease) 63,584 $ 825,076 140,614 $1,841,529 18,424 $ 243,431 (613,153) $(7,646,687)
--------- --------- --------- --------- --------- --------- --------- ----------
</TABLE>
46
<PAGE>
THE NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
[LOGO]
<TABLE>
<CAPTION>
NORTHSTAR ADVANTAGE GROWTH FUND
---------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
-------------------- -------------------- -------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- --------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 294,621 $5,453,559 116,727 $2,205,716 3,902 $ 73,428 191,904 $3,265,384
Reinvested dividends 17,194 267,392 20,122 312,150 704 10,926 951,457 14,803,074
Shares redeemed 224,597 4,152,792 8,675 165,916 161 3,133 1,077,114 18,840,154
--------- --------- --------- --------- --------- --------- --------- ----------
Net increase
(decrease) 87,218 $1,568,159 128,174 $2,351,950 4,445 $ 81,221 66,247 $ (771,696)
--------- --------- --------- --------- --------- --------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
NORTHSTAR ADVANTAGE SPECIAL FUND
---------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS T
-------------------- -------------------- -------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- --------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 131,315 $2,798,032 70,725 $1,537,491 2,986 $ 64,085 199,543 $3,892,577
Reinvested dividends 4,827 100,976 2,276 47,440 23 476 72,639 1,513,791
Shares redeemed 24,538 536,495 1,448 31,326 46 1,008 639,277 12,993,182
--------- --------- --------- --------- --------- --------- --------- ----------
Net increase
(decrease) 111,604 $2,362,513 71,553 $1,553,605 2,963 $ 63,553 (367,095) $(7,586,814)
--------- --------- --------- --------- --------- --------- --------- ----------
</TABLE>
Transactions in capital shares of each Fund for the period ended December 31,
1994:
<TABLE>
<CAPTION>
NORTHSTAR
ADVANTAGE NORTHSTAR NORTHSTAR NORTHSTAR
GOVERNMENT ADVANTAGE ADVANTAGE NORTHSTAR NORTHSTAR ADVANTAGE
SECURITIES STRATEGIC HIGH YIELD ADVANTAGE ADVANTAGE SPECIAL
FUND INCOME FUND FUND INCOME FUND GROWTH FUND FUND
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 2,245,605 2,179,305 4,838,429 816,629 738,054 836,044
Reinvested Dividends 688,507 41,216 814,933 315,928 69,353 13,295
shares redeemed (3,319,046) (72,391) (2,639,388) (986,442) (616,850) (259,035)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) (384,934) 2,148,130 3,013,974 146,115 190,557 590,304
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
NOTE 7. CREDIT RISK AND DEFAULTED SECURITIES
Although the Funds have a diversified portfolio, the High Yield Fund had
66.81% of its portfolio invested in lower rated and comparable quality unrated
high yield securities. Investments in higher yield securities are accompanied by
a greater degree of credit risk and such lower rated securities tend to be more
sensitive to economic conditions than higher rated securities. The risk of loss
due to default by the issuer may be significantly greater for the holders of
high yielding securities, because such securities are generally unsecured and
are often subordinated to other creditors of the issuer. At December 31, 1995,
the High Yield Fund and Strategic Income Fund held Ithaca Industries and
Wherehouse Entertainment, Inc., securities in default, respectively. The value
of these securities represented $701,125 or 0.39% of the High Yield Fund and
$180,000 or 0.24% of the Strategic Income Fund's net assets.
For financial reporting purposes, it is each Fund's accounting practice to
discontinue accrual of income and provide an estimate for probable losses due to
unpaid interest income on defaulted bonds for the current reporting period.
NOTE 8. TRANSFER OF NET ASSETS
At the close of business on October 27, 1995 (the "Closing"), the Northstar
Advantage Strategic Income Fund ("Strategic Income Fund") acquired the net
assets of the Northstar Advantage Multi-Sector Bond Fund, ("Multi-Sector Fund")
pursuant to an Agreement and Plan of Reorganization dated June 2, 1995. In
accordance with the agreement, the Strategic Income Fund, at the closing, issued
3,728,590 shares of the Strategic Income Fund having an aggregate value of
$45,577,269 which included unrealized depreciation on investments of $535,327
and accumulated net realized loss of $2,981,579. As a result the Strategic
Income Fund issued .370703764 share for each Multi-Sector Fund Class A and
47
<PAGE>
THE NORTHSTAR ADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
Class B share and .371826372 share for each Multi-Sector Fund Class C share. The
transaction was structured for tax purposes to qualify as a tax-free
reorganization under the Internal Revenue Code. Directly after the merger the
combined net assets in the Strategic Income Fund were $79,737,813 with a net
asset value of $12.22 for Class A and Class B shares and $12.21 for Class C
shares.
NOTE 9. SUBSEQUENT EVENTS
The shareholders of the Northstar Advantage Special Fund at a meeting dated
January 30, 1996 voted to approve a subadvisory agreement (the "Agreement")
between Northstar Investment Management Corporation, the Fund's investment
adviser (the "Adviser"), and Navellier Fund Management, Inc. (Navellier).
Pursuant to the Agreement, Navellier will assume responsibility for the day to
day investment management of the Fund, subject to the supervision of the Adviser
and the Trustees of the Fund. For its services, the Adviser will pay Navellier
an annual fee of 0.48% of 1% annually of average daily net assets of the Fund.
NOTE 10. FEDERAL INCOME TAX -- CAPITAL LOSS CARRYFORWARD
At December 31, 1995, the High Yield Fund had capital loss carryforwards
expiring December 31, 2002 and 2003 of $3,158,623 and $5,578,591, respectively.
The Government Securities Fund had capital loss carryforwards expiring December
31, 1996, 1997, 1998, and 2002 of $4,142,376, $2,940,526, $1,442,754 and
$16,737,216, respectively.
In addition, at December 31, 1995, Strategic Income Fund had remaining
acquired capital loss carryforwards expiring October 31, 2002 and 2003 of
$1,591,699 and $1,301,325, respectively. These acquired capital loss
carryforwards are subject to limitations on their use under the Internal Revenue
Code, as amended.
NOTE 11. COMPENSATING BALANCE ARRANGEMENT
The Funds have an informal compensating balance with the Custodian whereby
the Funds may have overdrafts in their respective accounts and have no interest
assessed on the overdrafts. In return, the Funds are required to maintain
positive balances to offset negative balances. The required deposits are
calculated by dividing the overdrawn amounts by 0.90. At December 31, 1995, the
Income Fund had a remaining obligation to leave $13,242,987 in the Fund's
account. This offset arrangement does not result in a reduction of the fees paid
by the Funds to the Custodian.
48
<PAGE>
NORTHSTAR ADVANTAGE TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
[LOGO]
To The Shareholders and Board of Trustees of
Northstar Advantage Government Securities Fund, Northstar Advantage Strategic
Income Fund,
Northstar Advantage High Yield Fund, Northstar Advantage Income Fund,
Northstar Advantage Growth Fund and Northstar Advantage Special Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolios of investments, of Northstar Advantage Government Securities
Fund, Northstar Advantage Strategic Income Fund, Northstar Advantage High Yield
Fund, Northstar Advantage Income Fund, Northstar Advantage Growth Fund and
Northstar Advantage Special Fund, (the "Funds") as of the December 31, 1995, and
the related statement of operations, the statement of changes in net assets and
the financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The financial statements for the year
ended December 31, 1994, were audited by other auditors, whose report dated
February 15, 1995, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1995, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Northstar Advantage Government Securities Fund, Northstar Advantage Strategic
Income Fund, Northstar Advantage High Yield Fund, Northstar Advantage Income
Fund, Northstar Advantage Growth Fund and Northstar Advantage Special Fund as of
December 31, 1995, the results of their operations, the changes in their net
assets and the financial highlights for the year then ended, in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
New York, New York
February 15, 1996
49
<PAGE>
<TABLE>
<S> <C> <C> <C>
TRUSTEES
Paul S. Doherty Mark L. Lipson John G. Turner
Robert B. Goode Walter H. May David W. C. Putnam
David W. Wallace Alan L. Gosule John R. Smith
Marjory D. Williams
</TABLE>
<TABLE>
<S> <C> <C>
PRINCIPAL OFFICERS
John G. Turner - Chairman Margaret D. Patel - Vice President
Mark L. Lipson - President Prescott B. Crocker - Vice President
Geoffrey Wadsworth - Vice President Thomas Ole Dial - Vice President
Lisa Hurley - Vice President & Secretary Ernest N. Mysogland - Vice President
Agnes Mullady - Vice President & Treasurer
INVESTMENT ADVISER ADMINISTRATOR
NORTHSTAR INVESTMENT NORTHSTAR ADMINISTRATORS CORPORATION
MANAGEMENT CORPORATION Two Pickwick Plaza
Two Pickwick Plaza Greenwich, CT 06830
Greenwich, CT 06830
DISTRIBUTOR TRANSFER AGENT
NORTHSTAR DISTRIBUTORS, INC. FIRST DATA INVESTORS SERVICES GROUP
Two Pickwick Plaza One Exchange Place
Greenwich, CT 06830 Boston, MA 02109
CUSTODIAN & FUND
ACCOUNTANT
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA 02110
</TABLE>
50
<PAGE>
ANNUAL REPORT TO SHAREHOLDERS
DECEMBER 31, 1995
<PAGE>
NAGS 02-23 10:26 **HYPO** Copr. 1996 TowersData
TOTAL RETURN CALCULATION - MAXIMUM SALES CHARGE INCLUDED
NORTHSTAR ADVANTAGE GOVT SEC A
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/ 5/95 1,000.00 9.9600 100.402 100.402 952.81
6/22/95 9.4600 100.955 0.052 5.23 0.000 0.00 0.553 955.03
7/25/95 9.0500 101.535 0.052 5.25 0.000 0.00 0.580 918.89
8/24/95 9.0400 102.118 0.052 5.27 0.000 0.00 0.583 923.15
9/26/95 9.2900 102.690 0.052 5.31 0.000 0.00 0.572 953.99
10/25/95 9.7200 103.241 0.052 5.36 0.000 0.00 0.551 l,003.50
11/22/95 9.6800 103.798 0.052 5.39 0.000 0.00 0.557 1,004.76
12/29/95 10.0700 104.345 0.053 5.51 0.000 0.00 0.547 1,050.75
12/31/95 10.0700 104.345 1,050.75
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(l+T) TO THE POWER OF n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00
ERV = Ending Redeemable Value $1,050.75
n = Number of Time Periods 0.57
T = Average Annual Total Return 9.07%
Overall Total Return 5.08%
<PAGE>
NBGS 02-23 10:30 **HYPO** Copr. 1996 TowersData
TOTAL RETURN CALCULATION - MAXIMUM SALES CHARGE INCLUDED
NORTHSTAR ADVANTAGE GOVT SEC B
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/ 5/95 1,000.00 9.4900 105.374 105.374 1,000.00
6/22/95 9.4600 105.893 0.047 4.91 0.000 0.00 0.519 1,001.75
7/25/95 9.0500 106.439 0.047 4.94 0.000 0.00 0.546 963.27
8/24/95 9.0400 106.989 0.047 4.97 0.000 0.00 0.550 967.18
9/26/95 9.3000 107.524 0.047 4.98 0.000 0.00 0.535 999.97
10/25/95 9.7200 108.037 0.046 4.99 0.000 0.00 0.513 1,050.12
11/22/95 9.6800 108.556 0.046 5.02 0.000 0.00 0.519 1,050.82
12/29/95 10.0700 109.068 0.048 5.16 0.000 0.00 0.512 1,098.31
12/31/95 10.0700 109.068 1,098.31
12/31/95 Less: 5.000% Contingent Deferred Sales Charge 50.00
12/31/95 Net Ending Redeemable Value 1,048.31
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(l+T) TO THE POWER OF n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00
ERV = Ending Redeemable Value $1,048.31
n = Number of Time Periods 0.57
T = Average Annual Total Return 8.63%
Overall Total Return 4.83%
<PAGE>
NCGS 02-23 10:30 **HYPO** Copr. 1996 TowersData
TOTAL RETURN CALCULATION - MAXIMUM SALES CHARGE INCLUDED
NORTHSTAR ADVANTAGE GOVT SEC C
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/ 5/95 l,000.00 9.4900 105.374 105.374 1,000.00
6/22/95 9.4600 105.893 0.047 4.91 0.000 0.00 0.519 1,001.75
7/25/95 9.0500 106.439 0.047 4.94 0.000 0.00 0.546 963.27
8/24/95 9.0400 106.989 0.047 4.97 0.000 0.00 0.550 967.18
9/26/95 9.3000 107.524 0.047 4.98 0.000 0.00 0.535 999.97
10/25/95 9.7200 108.037 0.046 4.99 0.000 0.00 0.513 1,050.12
11/22/95 9.6700 108.556 0.046 5.02 0.000 0.00 0.519 1,049.74
12/29/95 10.0700 109.068 0.048 5.16 0.000 0.00 0.512 1,098.31
12/31/95 10.0700 109.068 1,098.31
12/31/95 Less: 1.000% Contingent Deferred Sales Charge 10.00
12/31/95 Net Ending Redeemable Value 1,088.31
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(l+T) TO THE POWER OF n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00
ERV = Ending Redeemable Value $1,088.31
n = Number of Time Periods 0.57
T = Average Annual Total Return 16.01%
Overall Total Return 8.83%
<PAGE>
GOVT 02-23 10:43 **HYPO** Copr. 1996 TowersData
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
NORTHSTAR ADVANTAGE GOVT SEC T
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/ 3/86 1,000.00 10.0000 100.000 100.000 1,000.00
3/17/86 10.1200 100.889 0.000 0.00 0.090 9.00 0.889 1,021.00
3/19/86 10.0400 101.291 0.000 0.00 0.040 4.04 0.402 1,016.96
3/31/86 10.0700 101.826 0.053 5.39 0.000 0.00 0.535 1,025.39
4/30/86 10.1000 102.368 0.054 5.47 0.000 0.00 0.542 1,033.92
5/30/86 9.7800 102.928 0.054 5.48 0.000 0.00 0.560 1,006.64
6/30/86 9.9600 103.518 0.057 5.88 0.000 0.00 0.590 1,031.04
7/ 1/86 9.8700 104.221 0.000 0.00 0.067 6.94 0.703 1,028.66
7/31/86 9.9300 104.777 0.053 5.52 0.000 0.00 0.556 1,040.44
8/29/86 10.0000 105.280 0.048 5.03 0.000 0.00 0.503 1,052.80
9/30/86 9.8900 105.830 0.052 5.44 0.000 0.00 0.550 1,046.66
10/ 1/86 9.9100 106.598 0.000 0.00 0.072 7.61 0.768 1,056.39
10/31/86 10.0000 107.201 0.057 6.03 0.000 0.00 0.603 1,072.01
11/28/86 10.0600 107.756 0.052 5.58 0.000 0.00 0.555 1,084.03
12/31/86 9.9400 108.469 0.066 7.09 0.000 0.00 0.713 1,078.18
12/31/86 10.0030 108.469 1,085.02
1/ 2/87 9.9800 109.149 0.000 0.00 0.063 6.79 0.680 1,089.31
2/ 2/87 9.9800 109.758 0.056 6.08 0.000 0.00 0.609 1,095.38
3/ 2/87 10.0300 110.331 0.052 5.75 0.000 0.00 0.573 1,106.62
4/ 1/87 9.7700 111.471 0.061 6.73 0.040 4.41 1.140 1,089.07
5/ 1/87 9.3300 112.151 0.057 6.34 0.000 0.00 0.680 1,046.37
6/ 1/87 9.2800 112.808 0.054 6.10 0.000 0.00 0.657 1,046.86
7/ 1/87 9.3000 113.481 0.055 6.26 0.000 0.00 0.673 1,055.37
8/ 3/87 9.0900 114.203 0.058 6.56 0.000 0.00 0.722 1,038.11
9/ 1/87 8.9900 114.937 0.058 6.60 0.000 0.00 0.734 1,033.28
10/ 1/87 8.7800 115.608 0.051 5.89 0.000 0.00 0.671 1,015.04
11/ 2/87 8.8000 116.231 0.047 5.48 0.000 0.00 0.623 1,022.83
12/ 1/87 8.7800 116.860 0.048 5.52 0.000 0.00 0.629 1,026.03
12/28/87 8.7800 117.470 0.046 5.36 0.000 0.00 0.610 1,031.39
12/31/87 8.8000 117.470 1,033.74
2/ 1/88 9.0700 118.348 0.068 7.96 0.000 0.00 0.878 1,073.42
2/29/88 9.1100 119.068 0.055 6.56 0.000 0.00 0.720 1,084.71
3/31/88 8.8600 120.754 0.066 7.80 0.060 7.14 1.686 1,069.88
4/29/88 8.7500 121.496 0.054 6.49 0.000 0.00 0.742 1,063.09
Continued on Page 2
<PAGE>
GOVT -- Page 2
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/31/88 8.7200 122.121 0.045 5.45 0.000 0.00 0.625 1,064.90
6/30/88 8.6800 122.849 0.052 6.32 0.000 0.00 0.728 1,066.33
7/29/88 8.5800 123.787 0.066 8.05 0.000 0.00 0.938 1,062.09
8/31/88 8.5000 124.901 0.077 9.47 0.000 0.00 1.114 1,061.66
9/30/88 8.5300 125.914 0.069 8.64 0.000 0.00 1.013 1,074.05
10/31/88 8.5500 126.949 0.070 8.85 0.000 0.00 1.035 1,085.41
11/30/88 8.3600 127.944 0.066 8.32 0.000 0.00 0.995 1,069.61
12/27/88 8.2800 128.872 0.060 7.68 0.000 0.00 0.928 1,067.06
12/31/88 8.2600 128.872 1,064.48
1/31/89 8.3000 129.803 0.060 7.73 0.000 0.00 0.931 1,077.36
2/28/89 8.2100 130.752 0.060 7.79 0.000 0.00 0.949 1,073.47
3/31/89 8.1700 131.713 0.060 7.85 0.000 0.00 0.961 1,076.10
4/28/89 8.2400 132.672 0.060 7.90 0.000 0.00 0.959 1,093.22
5/25/89 8.3200 133.629 0.060 7.96 0.000 0.00 0.957 1,111.79
6/30/89 8.4500 134.578 0.060 8.02 0.000 0.00 0.949 1,137.18
7/31/89 8.5000 135.527 0.060 8.07 0.000 0.00 0.949 1,151.98
8/31/89 8.3600 136.499 0.060 8.13 0.000 0.00 0.972 1,141.13
9/29/89 8.3400 137.481 0.060 8.19 0.000 0.00 0.982 1,146.59
10/31/89 8.4500 138.457 0.060 8.25 0.000 0.00 0.976 1,169.96
11/30/89 8.4800 139.437 0.060 8.31 0.000 0.00 0.980 1,182.43
12/22/89 8.5000 140.422 0.060 8.37 0.000 0.00 0.985 1,193.59
12/31/89 8.4700 140.422 1,189.37
2/ 1/90 8.3100 141.385 0.057 8.00 0.000 0.00 0.963 1,174.91
2/28/90 8.3000 142.356 0.057 8.06 0.000 0.00 0.971 1,181.55
3/30/90 8.2500 143.339 0.057 8.11 0.000 0.00 0.983 1,182.55
4/30/90 8.0900 144.349 0.057 8.17 0.000 0.00 1.010 1,167.78
5/31/90 8.2600 145.345 0.057 8.23 0.000 0.00 0.996 1,200.55
6/29/90 8.3200 146.340 0.057 8.28 0.000 0.00 0.995 1,217.55
7/31/90 8.4000 147.333 0.057 8.34 0.000 0.00 0.993 1,237.60
8/31/90 8.2600 148.350 0.057 8.40 0.000 0.00 1.017 1,225.37
9/28/90 8.2400 149.377 0.057 8.46 0.000 0.00 1.027 1,230.87
10/31/90 8.2800 150.405 0.057 8.51 0.000 0.00 1.028 1,245.35
11/30/90 8.3900 151.426 0.057 8.57 0.000 0.00 1.021 1,270.46
12/21/90 8.4200 152.451 0.057 8.63 0.000 0.00 1.025 1,283.64
Continued on Page 3
<PAGE>
GOVT -- Page 3
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/90 8.4700 152.451 1,291.26
1/31/91 8.5300 153.470 0.057 8.69 0.000 0.00 1.019 1,309.10
2/28/91 8.5200 154.497 0.057 8.75 0.000 0.00 1.027 1,316.31
3/28/91 8.5200 155.531 0.057 8.81 0.000 0.00 1.034 1,325.12
4/30/91 8.5300 156.571 0.057 8.87 0.000 0.00 1.040 1,335.55
5/31/91 8.5400 157.615 0.057 8.92 0.000 0.00 1.044 1,346.03
6/28/91 8.5100 158.670 0.057 8.98 0.000 0.00 1.055 1,350.28
7/31/91 8.5800 159.724 0.057 9.04 0.000 0.00 1.054 1,370.43
8/30/91 8.6500 160.776 0.057 9.10 0.000 0.00 1.052 1,390.71
9/30/91 8.7200 161.826 0.057 9.16 0.000 0.00 1.050 1,411.12
10/31/91 8.8000 162.874 0.057 9.22 0.000 0.00 1.048 1,433.29
11/29/91 8.7800 163.857 0.053 8.63 0.000 0.00 0.983 1,438.66
12/26/91 8.9500 164.791 0.051 8.36 0.000 0.00 0.934 1,474.88
12/31/91 8.9900 164.791 1,481.47
1/31/92 8.7700 165.749 0.051 8.40 0.000 0.00 0.958 1,453.62
2/28/92 8.8000 166.709 0.051 8.45 0.000 0.00 0.960 1,467.04
3/31/92 8.6800 167.688 0.051 8.50 0.000 0.00 0.979 1,455.53
4/30/92 8.6900 168.672 0.051 8.55 0.000 0.00 0.984 1,465.76
5/29/92 8.8000 169.649 0.051 8.60 0.000 0.00 0.977 1,492.91
6/30/92 8.8700 170.624 0.051 8.65 0.000 0.00 0.975 1,513.43
7/31/92 9.0800 171.582 0.051 8.70 0.000 0.00 0.958 1,557.96
8/31/92 9.0700 172.547 0.051 8.75 0.000 0.00 0.965 1,565.00
9/30/92 9.1400 173.510 0.051 8.80 0.000 0.00 0.963 1,585.88
11/ 2/92 8.8400 174.511 0.051 8.85 0.000 0.00 1.001 1,542.68
11/30/92 8.9400 175.507 0.051 8.90 0.000 0.00 0.996 1,569.03
12/24/92 9.2700 176.378 0.046 8.07 0.000 0.00 0.871 1,635.02
12/31/92 9.2200 176.378 1,626.21
2/ 1/93 9.4700 177.234 0.046 8.11 0.000 0.00 0.856 1,678.41
3/ 1/93 9.7200 178.072 0.046 8.15 0.000 0.00 0.838 1,730.86
3/31/93 9.6800 178.918 0.046 8.19 0.000 0.00 0.846 1,731.93
4/30/93 9.6900 179.767 0.046 8.23 0.000 0.00 0.849 1,741.94
6/ 1/93 9.6500 180.624 0.046 8.27 0.000 0.00 0.857 1,743.02
6/30/93 10.0900 181.448 0.046 8.31 0.000 0.00 0.824 1,830.81
Continued on Page 4
<PAGE>
GOVT -- Page 4
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7/30/93 10.2500 182.298 0.048 8.71 0.000 0.00 0.850 1,868.55
8/31/93 10.7700 183.110 0.048 8.75 0.000 0.00 0.812 1,972.09
9/30/93 10.7500 183.928 0.048 8.79 0.000 0.00 0.818 1,977.23
11/ 1/93 10.8100 184.745 0.048 8.83 0.000 0.00 0.817 1,997.09
11/30/93 10.3400 185.603 0.048 8.87 0.000 0.00 0.858 1,919.14
12/28/93 10.4600 186.703 0.062 11.51 0.000 0.00 1.100 1,952.91
12/31/93 10.3200 186.703 1,926.77
1/31/94 10.5600 187.551 0.048 8.96 0.000 0.00 0.848 1,980.54
2/28/94 9.8800 188.462 0.048 9.00 0.000 0.00 0.911 1,862.00
3/31/94 9.3100 189.434 0.048 9.05 0.000 0.00 0.972 1,763.63
4/29/94 9.1400 190.429 0.048 9.09 0.000 0.00 0.995 1,740.52
5/31/94 9,0700 191.437 0.048 9.14 0.000 0.00 1.008 1,736.33
6/30/94 8.9600 192.463 0.048 9.19 0.000 0.00 1.026 1,724.47
7/29/94 9.0700 193.482 0.048 9.24 0.000 0.00 1.019 1,754.88
8/31/94 9.0200 194.512 0.048 9.29 0.000 0.00 1.030 1,754.50
9/30/94 8.8600 195.566 0.048 9.34 0.000 0.00 1.054 1,732.71
10/31/94 8.7700 196.637 0.048 9.39 0.000 0.00 1.071 1,724.51
11/30/94 8.7000 197.722 0.048 9.44 0.000 0.00 1.085 1,720.18
12/29/94 8.7400 198.808 0.048 9.49 0.000 0.00 1.086 1,737.58
12/31/94 8.7400 198.808 1,737.58
1/31/95 8.8500 199.931 0.050 9.94 0.000 0.00 1.123 1,769.39
2/28/95 8.9900 201.043 0.050 10.00 0.000 0.00 1.112 1,807.38
3/31/95 8.9500 202.166 0.050 10.05 0.000 0.00 1.123 1,809.39
4/28/95 9.0000 203.289 0.050 10.11 0.000 0.00 1.123 1,829.60
5/31/95 9.3600 204.374 0.050 10.16 0.000 0.00 1.085 1,912.94
6/22/95 9.4600 205.454 0.050 10.22 0.000 0.00 1.080 1,943.59
7/25/95 9.0500 206.589 0.050 10.27 0.000 0.00 1.135 1,869.63
8/24/95 9.0400 207.732 0.050 10.33 0.000 0.00 1.143 1,877.90
9/26/95 9.2900 208.850 0.050 10.39 0.000 0.00 1.118 1,940.22
10/25/95 9.7200 209.924 0.050 10.44 0.000 0.00 1.074 2,040.46
11/22/95 9.6700 211.010 0.050 10.50 0.000 0.00 1.086 2,040.47
12/29/95 10.0700 212.058 0.050 10.55 0.000 0.00 1.048 2,135.42
12/31/95 10.0700 212.058 2,135.42
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(l+T) TO THE POWER OF n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00
ERV = Ending Redeemable Value $2,135.42
n = Number of Time Periods 9.91
T = Average Annual Total Return 7.96%
Overall Total Return 113.54%
<PAGE>
GOVT 02-23 10:39 **HYPO** Copr. 1996 TowersData
TOTAL RETURN CALCULATION - NO SALES CHARGE INCLUDED
NORTHSTAR ADVANTAGE GOVT SEC T
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1/ 1/91 1,000.00 8.4700 118.064 118.064 1,000.00
1/31/91 8.5300 118.853 0.057 6.73 0.000 0.00 0.789 1,013.82
2/28/91 8.5200 119.648 0.057 6.77 0.000 0.00 0.795 1,019.40
3/28/91 8.5200 120.448 0.057 6.82 0.000 0.00 0.800 1,026.22
4/30/91 8.5300 121.253 0.057 6.87 0.000 0.00 0.805 1,034.29
5/31/91 8.5400 122.062 0.057 6.91 0.000 0.00 0.809 1,042.41
6/28/91 8.5100 122.880 0.057 6.96 0.000 0.00 0.818 1,045.71
7/31/91 8.5800 123.696 0.057 7.00 0.000 0.00 0.816 1,061.31
8/30/91 8.6500 124.511 0.057 7.05 0.000 0.00 0.815 1,077.02
9/30/91 8.7200 125.325 0.057 7.10 0.000 0.00 0.814 1,092.83
10/31/91 8.8000 126.136 0.057 7.14 0.000 0.00 0.811 1,110.00
11/29/91 8.7800 126.898 0.053 6.69 0.000 0.00 0.762 1,114.16
12/26/91 8.9500 127.621 0.051 6.47 0.000 0.00 0.723 1,142.21
12/31/91 8.9900 127.621 1,147.31
1/31/92 8.7700 128.363 0.051 6.51 0.000 0.00 0.742 1,125.74
2/28/92 8.8000 129.107 0.051 6.55 0.000 0.00 0.744 1,136.14
3/31/92 8.6800 129.865 0.051 6.58 0.000 0.00 0.758 1,127.23
4/30/92 8.6900 130.627 0.051 6.62 0.000 0.00 0.762 1,135.15
5/29/92 8.8000 131.384 0.051 6.66 0.000 0.00 0.757 1,156.18
6/30/92 8.8700 132.139 0.051 6.70 0.000 0.00 0.755 1,172.07
7/31/92 9.0800 132.881 0.051 6.74 0.000 0.00 0.742 1,206.56
8/31/92 9.0700 133.629 0.051 6.78 0.000 0.00 0.748 1,212.01
9/30/92 9.1400 134.375 0.051 6.82 0.000 0.00 0.746 1,228.19
11/ 2/92 8.8400 135.150 0.051 6.85 0.000 0.00 0.775 1,194.73
11/30/92 8.9400 135.921 0.051 6.89 0.000 0.00 0.771 1,215.13
12/24/92 9.2700 136.595 0.046 6.25 0.000 0.00 0.674 1,266.24
12/31/92 9.2200 136.595 1,259.41
2/ 1/93 9.4700 137.258 0.046 6.28 0.000 0.00 0.663 1,299.83
3/ 1/93 9.7200 137.907 0.046 6.31 0.000 0.00 0.649 1,340.46
3/31/93 9.6800 138.562 0.046 6.34 0.000 0.00 0.655 1,341.28
4/30/93 9.6900 139.219 0.046 6.37 0.000 0.00 0.657 1,349.03
6/ 1/93 9.6500 139.882 0.046 6.40 0.000 0.00 0.663 1,349.86
6/30/93 10.0900 140.519 0.046 6.43 0.000 0.00 0.637 1,417.84
7/30/93 10.2500 141.177 0.048 6.74 0.000 0.00 0.658 1,447.06
Continued on Page 2
<PAGE>
GOVT -- Page 2
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/93 10.7700 141.807 0.048 6.78 0.000 0.00 0.630 1,527.26
9/30/93 10.7500 142.440 0.048 6.81 0.000 0.00 0.633 1,531.23
11/ 1/93 10.8100 143.073 0.048 6.84 0.000 0.00 0.633 1,546.62
11/30/93 10.3400 143.737 0.048 6.87 0.000 0.00 0.664 1,486.24
12/28/93 10.4600 144.589 0.062 8.91 0.000 0.00 0.852 1,512.40
12/31/93 10.3200 144.589 1,492.16
1/31/94 10.5600 145.246 0.048 6.94 0.000 0.00 0.657 1,533.80
2/28/94 9.8800 145.951 0.048 6.97 0.000 0.00 0.705 1,442.00
3/31/94 9.3100 146.704 0.048 7.01 0.000 0.00 0.753 1,365.81
4/29/94 9.1400 147.474 0.048 7.04 0.000 0.00 0.770 1,347.91
5/31/94 9.0700 148.255 0.048 7.08 0.000 0.00 0.781 1,344.67
6/30/94 8.9600 149.050 0.048 7.12 0.000 0.00 0.795 1,335.49
7/29/94 9.0700 149.838 0.048 7.15 0.000 0.00 0.788 1,359.03
8/31/94 9.0200 150.635 0.048 7.19 0.000 0.00 0.797 1,358.73
9/30/94 8.8600 151.451 0.048 7.23 0.000 0.00 0.816 1,341.86
10/31/94 8.7700 152.280 0.048 7.27 0.000 0.00 0.829 1,335.50
11/30/94 8.7000 153.120 0.048 7.31 0.000 0.00 0.840 1,332.14
12/29/94 8.7400 153.961 0.048 7.35 0.000 0.00 0.841 1,345.62
12/31/94 8.7400 153.961 1,345.62
1/31/95 8.8500 154.831 0.050 7.70 0.000 0.00 0.870 1,370.25
2/28/95 8.9900 155.692 0.050 7.74 0.000 0.00 0.861 1,399.67
3/31/95 8.9500 156.561 0.050 7.78 0.000 0.00 0.869 1,401.22
4/28/95 9.0000 157.431 0.050 7.83 0.000 0.00 0.870 1,416.88
5/31/95 9.3600 158.272 0.050 7.87 0.000 0.00 0.841 1,481.43
6/22/95 9.4600 159.108 0.050 7.91 0.000 0.00 0.836 1,505.16
7/25/95 9.0500 159.988 0.050 7.96 0.000 0.00 0.880 1,447.89
8/24/95 9.0400 160.873 0.050 8.00 0.000 0.00 0.885 1,454.29
9/26/95 9.2900 161.738 0.050 8.04 0.000 0.00 0.865 1,502.55
10/25/95 9.7200 162.570 0.050 8.09 0.000 0.00 0.832 1,580.18
11/22/95 9.6700 163.411 0.050 8.13 0.000 0.00 0.841 1,580.18
12/29/95 10.0700 164.222 0.050 8.17 0.000 0.00 0.811 1,653.72
12/31/95 10.0700 164.222 1,653.72
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(l+T) TO THE POWER OF n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00
ERV = Ending Redeemable Value $1,653.72
n = Number of Time Periods 5.00
T = Average Annual Total Return 10.58%
Overall Total Return 65.37%
<PAGE>
GOVT -- Page 2
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/31/88 8.7200 122.121 0.045 5.45 0.000 0.00 0.625 1,064.90
6/30/88 8.6800 122.849 0.052 6.32 0.000 0.00 0.728 1,066.33
7/29/88 8.5800 123.787 0.066 8.05 0.000 0.00 0.938 1,062.09
8/31/88 8.5000 124.901 0.077 9.47 0.000 0.00 1.114 1,061.66
9/30/88 8.5300 125.914 0.069 8.64 0.000 0.00 1.013 1,074.05
10/31/88 8.5500 126.949 0.070 8.85 0.000 0.00 1.035 1,085.41
11/30/88 8.3600 127.944 0.066 8.32 0.000 0.00 0.995 1,069.61
12/27/88 8.2800 128.872 0.060 7.68 0.000 0.00 0.928 1,067.06
12/31/88 8.2600 128.872 1,064.48
1/31/89 8.3000 129.803 0.060 7.73 0.000 0.00 0.931 1,077.36
2/28/89 8.2100 130.752 0.060 7.79 0.000 0.00 0.949 1,073.47
3/31/89 8.1700 131.713 0.060 7.85 0.000 0.00 0.961 1,076.10
4/28/89 8.2400 132.672 0.060 7.90 0.000 0.00 0.959 1,093.22
5/25/89 8.3200 133.629 0.060 7.96 0.000 0.00 0.957 1,111.79
6/30/89 8.4500 134.578 0.060 8.02 0.000 0.00 0.949 1,137.18
7/31/89 8.5000 135.527 0.060 8.07 0.000 0.00 0.949 1,151.98
8/31/89 8.3600 136.499 0.060 8.13 0.000 0.00 0.972 1,141.13
9/29/89 8.3400 137.481 0.060 8.19 0.000 0.00 0.982 1,146.59
10/31/89 8.4500 138.457 0.060 8.25 0.000 0.00 0.976 1,169.96
11/30/89 8.4800 139.437 0.060 8.31 0.000 0.00 0.980 1,182.43
12/22/89 8.5000 140.422 0.060 8.37 0.000 0.00 0.985 1,193.59
12/31/89 8.4700 140.422 1,189.37
2/ 1/90 8.3100 141.385 0.057 8.00 0.000 0.00 0.963 1,174.91
2/28/90 8.3000 142.356 0.057 8.06 0.000 0.00 0.971 1,181.55
3/30/90 8.2500 143.339 0.057 8.11 0.000 0.00 0.983 1,182.55
4/30/90 8.0900 144.349 0.057 8.17 0.000 0.00 1.010 1,167.78
5/31/90 8.2600 145.345 0.057 8.23 0.000 0.00 0.996 1,200.55
6/29/90 8.3200 146.340 0.057 8.28 0.000 0.00 0.995 1,217.55
7/31/90 8.4000 147.333 0.057 8.34 0.000 0.00 0.993 1,237.60
8/31/90 8.2600 148.350 0.057 8.40 0.000 0.00 1.017 1,225.37
9/28/90 8.2400 149.377 0.057 8.46 0.000 0.00 1.027 1,230.87
10/31/90 8.2800 150.405 0.057 8.51 0.000 0.00 1.028 1,245.35
11/30/90 8.3900 151.426 0.057 8.57 0.000 0.00 1.021 1,270.46
12/21/90 8.4200 152.451 0.057 8.63 0.000 0.00 1.025 1,283.64
Continued on Page 3
<PAGE>
GOVT -- Page 3
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/90 8.4700 152.451 1,291.26
1/31/91 8.5300 153.470 0.057 8.69 0.000 0.00 1.019 1,309.10
2/28/91 8.5200 154.497 0.057 8.75 0.000 0.00 1.027 1,316.31
3/28/91 8.5200 155.531 0.057 8.81 0.000 0.00 1.034 1,325.12
4/30/91 8.5300 156.571 0.057 8.87 0.000 0.00 1.040 1,335.55
5/31/91 8.5400 157.615 0.057 8.92 0.000 0.00 1.044 1,346.03
6/28/91 8.5100 158.670 0.057 8.98 0.000 0.00 1.055 1,350.28
7/31/91 8.5800 159.724 0.057 9.04 0.000 0.00 1.054 1,370.43
8/30/91 8.6500 160.776 0.057 9.10 0.000 0.00 1.052 1,390.71
9/30/91 8.7200 161.826 0.057 9.16 0.000 0.00 1.050 1,411.12
10/31/91 8.8000 162.874 0.057 9.22 0.000 0.00 1.048 1,433.29
11/29/91 8.7800 163.857 0.053 8.63 0.000 0.00 0.983 1,438.66
12/26/91 8.9500 164.791 0.051 8.36 0.000 0.00 0.934 1,474.88
12/31/91 8.9900 164.791 1,481.47
1/31/92 8.7700 165.749 0.051 8.40 0.000 0.00 0.958 1,453.62
2/28/92 8.8000 166.709 0.051 8.45 0.000 0.00 0.960 1,467.04
3/31/92 8.6800 167.688 0.051 8.50 0.000 0.00 0.979 1,455.53
4/30/92 8.6900 168.672 0.051 8.55 0.000 0.00 0.984 1,465.76
5/29/92 8.8000 169.649 0.051 8.60 0.000 0.00 0.977 1,492.91
6/30/92 8.8700 170.624 0.051 8.65 0.000 0.00 0.975 1,513.43
7/31/92 9.0800 171.582 0.051 8.70 0.000 0.00 0.958 1,557.96
8/31/92 9.0700 172.547 0.051 8.75 0.000 0.00 0.965 1,565.00
9/30/92 9.1400 173.510 0.051 8.80 0.000 0.00 0.963 1,585.88
11/ 2/92 8.8400 174.511 0.051 8.85 0.000 0.00 1.001 1,542.68
11/30/92 8.9400 175.507 0.051 8.90 0.000 0.00 0.996 1,569.03
12/24/92 9.2700 176.378 0.046 8.07 0.000 0.00 0.871 1,635.02
12/31/92 9.2200 176.378 1,626.21
2/ 1/93 9.4700 177.234 0.046 8.11 0.000 0.00 0.856 1,678.41
3/ 1/93 9.7200 178.072 0.046 8.15 0.000 0.00 0.838 1,730.86
3/31/93 9.6800 178.918 0.046 8.19 0.000 0.00 0.846 1,731.93
4/30/93 9.6900 179.767 0.046 8.23 0.000 0.00 0.849 1,741.94
6/ 1/93 9.6500 180.624 0.046 8.27 0.000 0.00 0.857 1,743.02
6/30/93 10.0900 181.448 0.046 8.31 0.000 0.00 0.824 1,830.81
Continued on Page 4
<PAGE>
GOVT -- Page 4
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7/30/93 10.2500 182.298 0.048 8.71 0.000 0.00 0.850 1,868.55
8/31/93 10.7700 183.110 0.048 8.75 0.000 0.00 0.812 1,972.09
9/30/93 10.7500 183.928 0.048 8.79 0.000 0.00 0.818 1,977.23
11/ 1/93 10.8100 184.745 0.048 8.83 0.000 0.00 0.817 1,997.09
11/30/93 10.3400 185.603 0.048 8.87 0.000 0.00 0.858 1,919.14
12/28/93 10.4600 186.703 0.062 11.51 0.000 0.00 1.100 1,952.91
12/31/93 10.3200 186.703 1,926.77
1/31/94 10.5600 187.551 0.048 8.96 0.000 0.00 0.848 1,980.54
2/28/94 9.8800 188.462 0.048 9.00 0.000 0.00 0.911 1,862.00
3/31/94 9.3100 189.434 0.048 9.05 0.000 0.00 0.972 1,763.63
4/29/94 9.1400 190.429 0.048 9.09 0.000 0.00 0.995 1,740.52
5/31/94 9.0700 191.437 0.048 9.14 0.000 0.00 1.008 1,736.33
6/30/94 8.9600 192.463 0.048 9.19 0.000 0.00 1.026 1,724.47
7/29/94 9.0700 193.482 0.048 9.24 0.000 0.00 1.019 1,754.88
8/31/94 9.0200 194.512 0.048 9.29 0.000 0.00 1.030 1,754.50
9/30/94 8.8600 195.566 0.048 9.34 0.000 0.00 1.054 1,732.71
10/31/94 8.7700 196.637 0.048 9.39 0.000 0.00 1.071 1,724.51
11/30/94 8.7000 197.722 0.048 9.44 0.000 0.00 1.085 1,720.18
12/29/94 8.7400 198.808 0.048 9.49 0.000 0.00 1.086 1,737.58
12/31/94 8.7400 198.808 1,737.58
1/31/95 8.8500 199.931 0.050 9.94 0.000 0.00 1.123 1,769.39
2/28/95 8.9900 201.043 0.050 10.00 0.000 0.00 1.112 1,807.38
3/31/95 8.9500 202.166 0.050 10.05 0.000 0.00 1.123 1,809.39
4/28/95 9.0000 203.289 0.050 10.11 0.000 0.00 1.123 1,829.60
5/31/95 9.3600 204.374 0.050 10.16 0.000 0.00 1.085 1,912.94
6/22/95 9.4600 205.454 0.050 10.22 0.000 0.00 1.080 1,943.59
7/25/95 9.0500 206.589 0.050 10.27 0.000 0.00 1.135 1,869.63
8/24/95 9.0400 207.732 0.050 10.33 0.000 0.00 1.143 1,877.90
9/26/95 9.2900 208.850 0.050 10.39 0.000 0.00 1.118 1,940.22
10/25/95 9.7200 209.924 0.050 10.44 0.000 0.00 1.074 2,040.46
11/22/95 9.6700 211.010 0.050 10.50 0.000 0.00 1.086 2,040.47
12/29/95 10.0700 212.058 0.050 10.55 0.000 0.00 1.048 2,135.42
12/31/95 10.0700 212.058 2,135.42
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(l+T) TO THE POWER OF n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00
ERV = Ending Redeemable Value $2,135.42
n = Number of Time Periods 9.91
T = Average Annual Total Return 7.96%
Overall Total Return 113.54%
<PAGE>
GOVT 02-23 10:38 **HYPO** Copr. 1996 TowersData
TOTAL RETURN CALCULATION - MAXIMUM SALES CHARGE INCLUDED
NORTHSTAR ADVANTAGE GOVT SEC T
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/ 3/86 1,000.00 10.0000 100.000 100.000 1,000.00
3/17/86 10.1200 100.889 0.000 0.00 0.090 9.00 0.889 1,021.00
3/19/86 10.0400 101.291 0.000 0.00 0.040 4.04 0.402 1,016.96
3/31/86 10.0700 101.826 0.053 5.39 0.000 0.00 0.535 1,025.39
4/30/86 10.1000 102.368 0.054 5.47 0.000 0.00 0.542 1,033.92
5/30/86 9.7800 102.928 0.054 5.48 0.000 0.00 0.560 1,006.64
6/30/86 9.9600 103.518 0.057 5.88 0.000 0.00 0.590 1,031.04
7/ 1/86 9.8700 104.221 0.000 0.00 0.067 6.94 0.703 1,028.66
7/31/86 9.9300 104.777 0.053 5.52 0.000 0.00 0.556 1,040.44
8/29/86 10.0000 105.280 0.048 5.03 0.000 0.00 0.503 1,052.80
9/30/86 9.8900 105.830 0.052 5.44 0.000 0.00 0.550 1,046.66
10/ 1/86 9.9100 106.598 0.000 0.00 0.072 7.61 0.768 1,056.39
10/31/86 10.0000 107.201 0.057 6.03 0.000 0.00 0.603 1,072.01
11/28/86 10.0600 107.756 0.052 5.58 0.000 0.00 0.555 1,084.03
12/31/86 9.9400 108.469 0.066 7.09 0.000 0.00 0.713 1,078.18
12/31/86 10.0030 108.469 1,085.02
1/ 2/87 9.9800 109.149 0.000 0.00 0.063 6.79 0.680 1,089.31
2/ 2/87 9.9800 109.758 0.056 6.08 0.000 0.00 0.609 1,095.38
3/ 2/87 10.0300 110.331 0.052 5.75 0.000 0.00 0.573 1,106.62
4/ 1/87 9.7700 111.471 0.061 6.73 0.040 4.41 1.140 1,089.07
5/ 1/87 9.3300 112.151 0.057 6.34 0.000 0.00 0.680 1,046.37
6/ 1/87 9.2800 112.808 0.054 6.10 0.000 0.00 0.657 1,046.86
7/ 1/87 9.3000 113.481 0.055 6.26 0.000 0.00 0.673 1,055.37
8/ 3/87 9.0900 114.203 0.058 6.56 0.000 0.00 0.722 1,038.11
9/ 1/87 8.9900 114.937 0.058 6.60 0.000 0.00 0.734 1,033.28
10/ 1/87 8.7800 115.608 0.051 5.89 0.000 0.00 0.671 1,015.04
11/ 2/87 8.8000 116.231 0.047 5.48 0.000 0.00 0.623 1,022.83
12/ 1/87 8.7800 116.860 0.048 5.52 0.000 0.00 0.629 1,026.03
12/28/87 8.7800 117.470 0.046 5.36 0.000 0.00 0.610 1,031.39
12/31/87 8.8000 117.470 1,033.74
2/ 1/88 9.0700 118.348 0.068 7.96 0.000 0.00 0.878 1,073.42
2/29/88 9.1100 119.068 0.055 6.56 0.000 0.00 0.720 1,084.71
3/31/88 8.8600 120.754 0.066 7.80 0.060 7.14 1.686 1,069.88
4/29/88 8.7500 121.496 0.054 6.49 0.000 0.00 0.742 1,063.09
Continued on Page 2
<PAGE>
GOVT -- Page 2
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/93 10.7700 141.807 0.048 6.78 0.000 0.00 0.630 1,527.26
9/30/93 10.7500 142.440 0.048 6.81 0.000 0.00 0.633 1,531.23
11/ 1/93 10.8100 143.073 0.048 6.84 0.000 0.00 0.633 1,546.62
11/30/93 10.3400 143.737 0.048 6.87 0.000 0.00 0.664 1,486.24
12/28/93 10.4600 144.589 0.062 8.91 0.000 0.00 0.852 1,512.40
12/31/93 10.3200 144.589 1,492.16
1/31/94 10.5600 145.246 0.048 6.94 0.000 0.00 0.657 1,533.80
2/28/94 9.8800 145.951 0.048 6.97 0.000 0.00 0.705 1,442.00
3/31/94 9.3100 146.704 0.048 7.01 0.000 0.00 0.753 1,365.81
4/29/94 9.1400 147.474 0.048 7.04 0.000 0.00 0.770 1,347.91
5/31/94 9.0700 148.255 0.048 7.08 0.000 0.00 0.781 1,344.67
6/30/94 8.9600 149.050 0.048 7.12 0.000 0.00 0.795 1,335.49
7/29/94 9.0700 149.838 0.048 7.15 0.000 0.00 0.788 1,359.03
8/31/94 9.0200 150.635 0.048 7.19 0.000 0.00 0.797 1,358.73
9/30/94 8.8600 151.451 0.048 7.23 0.000 0.00 0.816 1,341.86
10/31/94 8.7700 152.280 0.048 7.27 0.000 0.00 0.829 1,335.50
11/30/94 8.7000 153.120 0.048 7.31 0.000 0.00 0.840 1,332.14
12/29/94 8.7400 153.961 0.048 7.35 0.000 0.00 0.841 1,345.62
12/31/94 8.7400 153.961 1,345.62
1/31/95 8.8500 154.831 0.050 7.70 0.000 0.00 0.870 1,370.25
2/28/95 8.9900 155.692 0.050 7.74 0.000 0.00 0.861 1,399.67
3/31/95 8.9500 156.561 0.050 7.78 0.000 0.00 0.869 1,401.22
4/28/95 9.0000 157.431 0.050 7.83 0.000 0.00 0.870 1,416.88
5/31/95 9.3600 158.272 0.050 7.87 0.000 0.00 0.841 1,481.43
6/22/95 9.4600 159.108 0.050 7.91 0.000 0.00 0.836 1,505.16
7/25/95 9.0500 159.988 0.050 7.96 0.000 0.00 0.880 1,447.89
8/24/95 9.0400 160.873 0.050 8.00 0.000 0.00 0.885 1,454.29
9/26/95 9.2900 161.738 0.050 8.04 0.000 0.00 0.865 1,502.55
10/25/95 9.7200 162.570 0.050 8.09 0.000 0.00 0.832 1,580.18
11/22/95 9.6700 163.411 0.050 8.13 0.000 0.00 0.841 1,580.18
12/29/95 10.0700 164.222 0.050 8.17 0.000 0.00 0.811 1,653.72
12/31/95 10.0700 164.222 1,653.72
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(l+T)TO THE POWER OF n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00
ERV = Ending Redeemable Value $1,653.72
n = Number of Time Periods 5.00
T = Average Annual Total Return 10.58%
Overall Total Return 65.37%
<PAGE>
GOVT 02-23 10:38 **HYPO** Copr. 1996 TowersData
TOTAL RETURN CALCULATION - MAXIMUM SALES CHARGE INCLUDED
NORTHSTAR ADVANTAGE GOVT SEC T
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1/ 1/91 1,000.00 8.4700 118.064 118.064 1,000.00
1/31/91 8.5300 118.853 0.057 6.73 0.000 0.00 0.789 1,013.82
2/28/91 8.5200 119.648 0.057 6.77 0.000 0.00 0.795 1,019.40
3/28/91 8.5200 120.448 0.057 6.82 0.000 0.00 0.800 1,026.22
4/30/91 8.5300 121.253 0.057 6.87 0.000 0.00 0.805 1,034.29
5/31/91 8.5400 122.062 0.057 6.91 0.000 0.00 0.809 1,042.41
6/28/91 8.5100 122.880 0.057 6.96 0.000 0.00 0.818 1,045.71
7/31/91 8.5800 123.696 0.057 7.00 0.000 0.00 0.816 1,061.31
8/30/91 8.6500 124.511 0.057 7.05 0.000 0.00 0.815 1,077.02
9/30/91 8.7200 125.325 0.057 7.10 0.000 0.00 0.814 1,092.83
10/31/91 8.8000 126.136 0.057 7.14 0.000 0.00 0.811 1,110.00
11/29/91 8.7800 126.898 0.053 6.69 0.000 0.00 0.762 1,114.16
12/26/91 8.9500 127.621 0.051 6.47 0.000 0.00 0.723 1,142.21
12/31/91 8.9900 127.621 1,147.31
1/31/92 8.7700 128.363 0.051 6.51 0.000 0.00 0.742 1,125.74
2/28/92 8.8000 129.107 0.051 6.55 0.000 0.00 0.744 1,136.14
3/31/92 8.6800 129.865 0.051 6.58 0.000 0.00 0.758 1,127.23
4/30/92 8.6900 130.627 0.051 6.62 0.000 0.00 0.762 1,135.15
5/29/92 8.8000 131.384 0.051 6.66 0.000 0.00 0.757 1,156.18
6/30/92 8.8700 132.139 0.051 6.70 0.000 0.00 0.755 1,172.07
7/31/92 9.0800 132.881 0.051 6.74 0.000 0.00 0.742 1,206.56
8/31/92 9.0700 133.629 0.051 6.78 0.000 0.00 0.748 1,212.01
9/30/92 9.1400 134.375 0.051 6.82 0.000 0.00 0.746 1,228.19
11/ 2/92 8.8400 135.150 0.051 6.85 0.000 0.00 0.775 1,194.73
11/30/92 8.9400 135.921 0.051 6.89 0.000 0.00 0.771 1,215.13
12/24/92 9.2700 136.595 0.046 6.25 0.000 0.00 0.674 1,266.24
12/31/92 9.2200 136.595 1,259.41
2/ 1/93 9.4700 137.258 0.046 6.28 0.000 0.00 0.663 1,299.83
3/ 1/93 9.7200 137.907 0.046 6.31 0.000 0.00 0.649 1,340.46
3/31/93 9.6800 138.562 0.046 6.34 0.000 0.00 0.655 1,341.28
4/30/93 9.6900 139.219 0.046 6.37 0.000 0.00 0.657 1,349.03
6/ 1/93 9.6500 139.882 0.046 6.40 0.000 0.00 0.663 1,349.86
6/30/93 10.0900 140.519 0.046 6.43 0.000 0.00 0.637 1,417.84
7/30/93 10.2500 141.177 0.048 6.74 0.000 0.00 0.658 1,447.06
Continued on Page 2
<PAGE>
GOVT 02-23 10:33 **HYPO** Copr. 1996 TowersData
TOTAL RETURN CALCULATION - MAXIMUM SALES CHARGE INCLUDED
NORTHSTAR ADVANTAGE GOVT SEC T
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/ 3/86 1,000.00 10.0000 100.000 100.000 1,000.00
3/17/86 10.1200 100.889 0.000 0.00 0.090 9.00 0.889 1,021.00
3/19/86 10.0400 101.291 0.000 0.00 0.040 4.04 0.402 1,016.96
3/31/86 10.0700 101.826 0.053 5.39 0.000 0.00 0.535 1,025.39
4/30/86 10.1000 102.368 0.054 5.47 0.000 0.00 0.542 1,033.92
5/30/86 9.7800 102.928 0.054 5.48 0.000 0.00 0.560 1,006.64
6/30/86 9.9600 103.518 0.057 5.88 0.000 0.00 0.590 1,031.04
7/ 1/86 9.8700 104.221 0.000 0.00 0.067 6.94 0.703 1,028.66
7/31/86 9.9300 104.777 0.053 5.52 0.000 0.00 0.556 1,040.44
8/29/86 10.0000 105.280 0.048 5.03 0.000 0.00 0.503 1,052.80
9/30/86 9.8900 105.830 0.052 5.44 0.000 0.00 0.550 1,046.66
10/ 1/86 9.9100 106.598 0.000 0.00 0.072 7.61 0.768 1,056.39
10/31/86 10.0000 107.201 0.057 6.03 0.000 0.00 0.603 1,072.01
11/28/86 10.0600 107.756 0.052 5.58 0.000 0.00 0.555 1,084.03
12/31/86 9.9400 108.469 0.066 7.09 0.000 0.00 0.713 1,078.18
12/31/86 10.0030 108.469 1,085.02
1/ 2/87 9.9800 109.149 0.000 0.00 0.063 6.79 0.680 1,089.31
2/ 2/87 9.9800 109.758 0.056 6.08 0.000 0.00 0.609 1,095.38
3/ 2/87 10.0300 110.331 0.052 5.75 0.000 0.00 0.573 1,106.62
4/ 1/87 9.7700 111.471 0.061 6.73 0.040 4.41 1.140 1,089.07
5/ 1/87 9.3300 112.151 0.057 6.34 0.000 0.00 0.680 1,046.37
6/ 1/87 9.2800 112.808 0.054 6.10 0.000 0.00 0.657 1,046.86
7/ 1/87 9.3000 113.481 0.055 6.26 0.000 0.00 0.673 1,055.37
8/ 3/87 9.0900 114.203 0.058 6.56 0.000 0.00 0.722 1,038.11
9/ 1/87 8.9900 114.937 0.058 6.60 0.000 0.00 0.734 1,033.28
10/ 1/87 8.7800 115.608 0.051 5.89 0.000 0.00 0.671 1,015.04
11/ 2/87 8.8000 116.231 0.047 5.48 0.000 0.00 0.623 1,022.83
12/ 1/87 8.7800 116.860 0.048 5.52 0.000 0.00 0.629 1,026.03
12/28/87 8.7800 117.470 0.046 5.36 0.000 0.00 0.610 1,031.39
12/31/87 8.8000 117.470 1,033.74
2/ 1/88 9.0700 118.348 0.068 7.96 0.000 0.00 0.878 1,073.42
2/29/88 9.1100 119.068 0.055 6.56 0.000 0.00 0.720 1,084.71
3/31/88 8.8600 120.754 0.066 7.80 0.060 7.14 1.686 1,069.88
4/29/88 8.7500 121.496 0.054 6.49 0.000 0.00 0.742 1,063.09
Continued on Page 2
<PAGE>
GOVT -- Page 2
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/31/88 8.7200 122.121 0.045 5.45 0.000 0.00 0.625 1,064.90
6/30/88 8.6800 122.849 0.052 6.32 0.000 0.00 0.728 1,066.33
7/29/88 8.5800 123.787 0.066 8.05 0.000 0.00 0.938 1,062.09
8/31/88 8.5000 124.901 0.077 9.47 0.000 0.00 1.114 1,061.66
9/30/88 8.5300 125.914 0.069 8.64 0.000 0.00 1.013 1,074.05
10/31/88 8.5500 126.949 0.070 8.85 0.000 0.00 1.035 1,085.41
11/30/88 8.3600 127.944 0.066 8.32 0.000 0.00 0.995 1,069.61
12/27/88 8.2800 128.872 0.060 7.68 0.000 0.00 0.928 1,067.06
12/31/88 8.2600 128.872 1,064.48
1/31/89 8.3000 129.803 0.060 7.73 0.000 0.00 0.931 1,077.36
2/28/89 8.2100 130.752 0.060 7.79 0.000 0.00 0.949 1,073.47
3/31/89 8.1700 131.713 0.060 7.85 0.000 0.00 0.961 1,076.10
4/28/89 8.2400 132.672 0.060 7.90 0.000 0.00 0.959 1,093.22
5/25/89 8.3200 133.629 0.060 7.96 0.000 0.00 0.957 1,111.79
6/30/89 8.4500 134.578 0.060 8.02 0.000 0.00 0.949 1,137.18
7/31/89 8.5000 135.527 0.060 8.07 0.000 0.00 0.949 1,151.98
8/31/89 8.3600 136.499 0.060 8.13 0.000 0.00 0.972 1,141.13
9/29/89 8.3400 137.481 0.060 8.19 0.000 0.00 0.982 1,146.59
10/31/89 8.4500 138.457 0.060 8.25 0.000 0.00 0.976 1,169.96
11/30/89 8.4800 139.437 0.060 8.31 0.000 0.00 0.980 1,182.43
12/22/89 8.5000 140.422 0.060 8.37 0.000 0.00 0.985 1,193.59
12/31/89 8.4700 140.422 1,189.37
2/ 1/90 8.3100 141.385 0.057 8.00 0.000 0.00 0.963 1,174.91
2/28/90 8.3000 142.356 0.057 8.06 0.000 0.00 0.971 1,181.55
3/30/90 8.2500 143.339 0.057 8.11 0.000 0.00 0.983 1,182.55
4/30/90 8.0900 144.349 0.057 8.17 0.000 0.00 1.010 1,167.78
5/31/90 8.2600 145.345 0.057 8.23 0.000 0.00 0.996 1,200.55
6/29/90 8.3200 146.340 0.057 8.28 0.000 0.00 0.995 1,217.55
7/31/90 8.4000 147.333 0.057 8.34 0.000 0.00 0.993 1,237.60
8/31/90 8.2600 148.350 0.057 8.40 0.000 0.00 1.017 1,225.37
9/28/90 8.2400 149.377 0.057 8.46 0.000 0.00 1.027 1,230.87
10/31/90 8.2800 150.405 0.057 8.51 0.000 0.00 1.028 1,245.35
11/30/90 8.3900 151.426 0.057 8.57 0.000 0.00 1.021 1,270.46
12/21/90 8.4200 152.451 0.057 8.63 0.000 0.00 1.025 1,283.64
Continued on Page 3
<PAGE>
GOVT -- Page 3
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/90 8.4700 152.451 1,291.26
1/31/91 8.5300 153.470 0.057 8.69 0.000 0.00 1.019 1,309.10
2/28/91 8.5200 154.497 0.057 8.75 0.000 0.00 1.027 1,316.31
3/28/91 8.5200 155.531 0.057 8.81 0.000 0.00 1.034 1,325.12
4/30/91 8.5300 156.571 0.057 8.87 0.000 0.00 1.040 1,335.55
5/31/91 8.5400 157.615 0.057 8.92 0.000 0.00 1.044 1,346.03
6/28/91 8.5100 158.670 0.057 8.98 0.000 0.00 1.055 1,350.28
7/31/91 8.5800 159.724 0.057 9.04 0.000 0.00 1.054 1,370.43
8/30/91 8.6500 160.776 0.057 9.10 0.000 0.00 1.052 1,390.71
9/30/91 8.7200 161.826 0.057 9.16 0.000 0.00 1.050 1,411.12
10/31/91 8.8000 162.874 0.057 9.22 0.000 0.00 1.048 1,433.29
11/29/91 8.7800 163.857 0.053 8.63 0.000 0.00 0.983 1,438.66
12/26/91 8.9500 164.791 0.051 8.36 0.000 0.00 0.934 1,474.88
12/31/91 8.9900 164.791 1,481.47
1/31/92 8.7700 165.749 0.051 8.40 0.000 0.00 0.958 1,453.62
2/28/92 8.8000 166.709 0.051 8.45 0.000 0.00 0.960 1,467.04
3/31/92 8.6800 167.688 0.051 8.50 0.000 0.00 0.979 1,455.53
4/30/92 8.6900 168.672 0.051 8.55 0.000 0.00 0.984 1,465.76
5/29/92 8.8000 169.649 0.051 8.60 0.000 0.00 0.977 1,492.91
6/30/92 8.8700 170.624 0.051 8.65 0.000 0.00 0.975 1,513.43
7/31/92 9.0800 171.582 0.051 8.70 0.000 0.00 0.958 1,557.96
8/31/92 9.0700 172.547 0.051 8.75 0.000 0.00 0.965 1,565.00
9/30/92 9.1400 173.510 0.051 8.80 0.000 0.00 0.963 1,585.88
11/ 2/92 8.8400 174.511 0.051 8.85 0.000 0.00 1.001 1,542.68
11/30/92 8.9400 175.507 0.051 8.90 0.000 0.00 0.996 1,569.03
12/24/92 9.2700 176.378 0.046 8.07 0.000 0.00 0.871 1,635.02
12/31/92 9.2200 176.378 1,626.21
2/ 1/93 9.4700 177.234 0.046 8.11 0.000 0.00 0.856 1,678.41
3/ 1/93 9.7200 178.072 0.046 8.15 0.000 0.00 0.838 1,730.86
3/31/93 9.6800 178.918 0.046 8.19 0.000 0.00 0.846 1,731.93
4/30/93 9.6900 179.767 0.046 8.23 0.000 0.00 0.849 1,741.94
6/ 1/93 9.6500 180.624 0.046 8.27 0.000 0.00 0.857 1,743.02
6/30/93 10.0900 181.448 0.046 8.31 0.000 0.00 0.824 1,830.81
Continued on Page 4
<PAGE>
GOVT -- Page 4
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7/30/93 10.2500 182.298 0.048 8.71 0.000 0.00 0.850 1,868.55
8/31/93 10.7700 183.110 0.048 8.75 0.000 0.00 0.812 1,972.09
9/30/93 10.7500 183.928 0.048 8.79 0.000 0.00 0.818 1,977.23
11/ 1/93 10.8100 184.745 0.048 8.83 0.000 0.00 0.817 1,997.09
11/30/93 10.3400 185.603 0.048 8.87 0.000 0.00 0.858 1,919.14
12/28/93 10.4600 186.703 0.062 11.51 0.000 0.00 1.100 1,952.91
12/31/93 10.3200 186.703 1,926.77
1/31/94 10.5600 187.551 0.048 8.96 0.000 0.00 0.848 1,980.54
2/28/94 9.8800 188.462 0.048 9.00 0.000 0.00 0.911 1,862.00
3/31/94 9.3100 189.434 0.048 9.05 0.000 0.00 0.972 1,763.63
4/29/94 9.1400 190.429 0.048 9.09 0.000 0.00 0.995 1,740.52
5/31/94 9.0700 191.437 0.048 9.14 0.000 0.00 1.008 1,736.33
6/30/94 8.9600 192.463 0.048 9.19 0.000 0.00 1.026 1,724.47
7/29/94 9.0700 193.482 0.048 9.24 0.000 0.00 1.019 1,754.88
8/31/94 9.0200 194.512 0.048 9.29 0.000 0.00 1.030 1,754.50
9/30/94 8.8600 195.566 0.048 9.34 0.000 0.00 1.054 1,732.71
10/31/94 8.7700 196.637 0.048 9.39 0.000 0.00 1.071 1,724.51
11/30/94 8.7000 197.722 0.048 9.44 0.000 0.00 1.085 1,720.18
12/29/94 8.7400 198.808 0.048 9.49 0.000 0.00 1.086 1,737.58
12/31/94 8.7400 198.808 1,737.58
1/31/95 8.8500 199.931 0.050 9.94 0.000 0.00 1.123 1,769.39
2/28/95 8.9900 201.043 0.050 10.00 0.000 0.00 1.112 1,807.38
3/31/95 8.9500 202.166 0.050 10.05 0.000 0.00 1.123 1,809.39
4/28/95 9.0000 203.289 0.050 10.11 0.000 0.00 1.123 1,829.60
5/31/95 9.3600 204.374 0.050 10.16 0.000 0.00 1.085 1,912.94
6/22/95 9.4600 205.454 0.050 10.22 0.000 0.00 1.080 1,943.59
7/25/95 9.0500 206.589 0.050 10.27 0.000 0.00 1.135 1,869.63
8/24/95 9.0400 207.732 0.050 10.33 0.000 0.00 1.143 1,877.90
9/26/95 9.2900 208.850 0.050 10.39 0.000 0.00 1.118 1,940.22
10/25/95 9.7200 209.924 0.050 10.44 0.000 0.00 1.074 2,040.46
11/22/95 9.6700 211.010 0.050 10.50 0.000 0.00 1.086 2,040.47
12/29/95 10.0700 212.058 0.050 10.55 0.000 0.00 1.048 2,135.42
12/31/95 10.0700 212.058 2,135.42
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(l+T) TO THE POWER OF n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00
ERV = Ending Redeemable Value $2,135.42
n = Number of Time Periods 9.91
T = Average Annual Total Return 7.96%
Overall Total Return 113.54%
<PAGE>
GOVT 02-23 10:36 **HYPO** Copr. 1996 TowersData
TOTAL RETURN CALCULATION - MAXIMUM SALES CHARGE INCLUDED
NORTHSTAR ADVANTAGE GOVT SEC T
<TABLE>
<CAPTION>
Price per Shares Cumulative Dividends Reinvested Capital Gains Reinvested Reinvested Total
Date Amount Share Purchased Shares per Share Dividends per Share Capital Gains Shares Market Value
---- ------ --------- --------- ---------- --------- ---------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1/ 1/95 1,000.00 8.7400 114.416 114.416 1,000.00
1/31/95 8.8500 115.062 0.050 5.72 0.000 0.00 0.646 1,018.30
2/28/95 8.9900 115.702 0.050 5.75 0.000 0.00 0.640 1,040.16
3/31/95 8.9500 116.349 0.050 5.79 0.000 0.00 0.647 1,041.32
4/28/95 9.0000 116.996 0.050 5.82 0.000 0.00 0.647 1,052.96
5/31/95 9.3600 117.621 0.050 5.85 0.000 0.00 0.625 1,100.93
6/22/95 9.4600 118.243 0.050 5.88 0.000 0.00 0.622 1,118.58
7/25/95 9.0500 118.896 0.050 5.91 0.000 0.00 0.653 1,076.01
8/24/95 9.0400 119.553 0.050 5.94 0.000 0.00 0.657 1,080.76
9/26/95 9.2900 120.197 0.050 5.98 0.000 0.00 0.644 1,116.63
10/25/95 9.7200 120.815 0.050 6.01 0.000 0.00 0.618 1,174.32
11/22/95 9.6700 121.440 0.050 6.04 0.000 0.00 0.625 1,174.32
12/29/95 10.0700 122.043 0.050 6.07 0.000 0.00 0.603 1,228.97
12/31/95 10.0700 122.043 1,228.97
12/31/95 Less: 4.000% Contingent Deferred Sales Charge 40.00
12/31/95 Net Ending Redeemable Value 1,188.97
</TABLE>
FORMULA -- Average Annual Total Return: ERV = P(l+T) TO THE POWER OF n
Overall Total Return: ERV/P -1
Where: P = Initial Investment $1,000.00
ERV = Ending Redeemable Value $1,188.97
n = Number of Time Periods 1.00
T = Average Annual Total Return 18.90%
Overall Total Return 18.90%
<PAGE>
Exhibit 17
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Mark L. Lipson, Agnes Mullady and Lisa Hurley, and each of them his true and
lawful attorney-in-fact as agent with full power of substitution and
resubstitution of him in his name, place, and stead, to sign any and all
registration statements on Form N-1A applicable to the Northstar Advantage
Trust, the Northstar Advantage Special Fund, the Northstar Advantage Strategic
Income Fund, the Northstar Advantage Income Fund, the Northstar Advantage High
Yield Fund, the Northstar Advantage Government Securities Fund, and the
Northstar Advantage Growth Fund and any amendment or supplement thereto, and to
file the same with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitutes, may lawfully do or
cause to be done by virtue hereof.
Dated: January 26, 1996
WALTER H. MAY
------------------------------------
Walter H. May
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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</TABLE>
